• El Salvador is drafting 20 bills to establish a legal framework for Bitcoin bonds

  • The slew of measures will assist El Salvador’s government in establishing the legal and financial framework for the $1 billion Volcano Bonds Bitcoin bond offering.

    El Salvador’s administration, led by President Nayib Bukele, has moved forward with plans to issue Bitcoin (BTC) bonds by drafting 20 bills that will serve as a legal foundation for them.

    The treasury’s head, Alejandro Zelaya, told the Salvadoran newspaper El Mundo on Tuesday that the laws will contain regulations for issuing securities in cryptocurrency in order to ensure the feasibility of the Bitcoin bonds proposed in November 2021. He stated:

    “[This is] to provide everyone who buys the Bitcoin bond with a legal structure and legal assurance.”

    He did not, however, propose a timetable for the legislation’s submission to lawmakers.

    The $1 billion sought by the bond issuance would be used to fund President Bukele’s Bitcoin City initiative, which he promises will provide “digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transportation.”

    One of the Bitcoin City’s attractions is a Bitcoin mining business that uses geothermal electricity generated by a volcano to power mining equipment, earning the bonds the moniker “Volcano Bonds.” On October 1, 2021, the mining operation mined its first 0.00599179 BTC.

    The bond proceeds could also be used to repay a $800 million Eurobond issue that will mature in January 2023. According to Zelaya, the country will need to find financiers to help them meet their responsibility to repay the Eurobonds, which might come via Bitcoin bonds or “institutional proposals from various investment institutions” rather than another Eurobond issue.

    “We can easily make payments without issuing another Eurobond on the usual market, and we can find a bond denominated in dollars that accepts payment in Bitcoin.”

    A Eurobond is a debt instrument that allows countries to raise financing in a currency other than their own.

    Investors are interested in the Bitcoin bond, according to Zelaya, because it provides exposure to BTC and a 10-year maturity at 6.5 percent interest.

    The issue of Bitcoin bonds, however, would not stop the Central American country from engaging in traditional financing. “We are not going to abandon the traditional market,” Zelaya stated.

    Notable Volcano Bonds partners with El Salvador include blockchain developer Blockstream and iFinex, the latter of which is closely tied to stablecoin Tether (USDT). The bonds will be issued on Blockstream’s Liquid Network and will be processed by iFinex.

    On Sunday, Bukele tweeted his 2022 predictions, stating that “Bitcoin City will begin building” and “Volcano bonds will be oversubscribed.”

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