El Salvador Passes A New Law, Issues Bitcoin-backed Bonds

Key Takeaways

  • The country has passed legislation allowing a legal framework for a Bitcoin-backed bond — termed the “Volcano Bond.”
  • The Volcano Bonds will go towards building a BTC mining industry reliant entirely on renewable energy.

El Salvador, the first country to make Bitcoin legal tender, is now paving the forward for other countries with its crypto-friendly regulations. On January 11, the country passed legislation allowing a legal framework for a Bitcoin-backed bond — termed the “Volcano Bond.”

El Salvador states that it has built on its “first-mover advantage by passing landmark legislation establishing a legal framework for all digital assets that are not bitcoin.” 

The bill will become law after it is signed and ratified by El Salvador President Nayib Bukele. The Volcano Bonds is expected to go towards building a bitcoin mining industry reliant entirely on renewable energy, including the energy generated by the country’s active volcanos.

The Bitcoin-backed bonds will be used to pay off the sovereign debt and fund the construction of its proposed “Bitcoin City.”The government plans on locating a power plant by the proposed “Bitcoin city “to provide energy for both the city and bitcoin mining. Crypto exchange Bitfinex is the technology provider for the Volcano Bond. Bitcoin bond issuance has been in the works for quite some time. 

In late 2021, President Bukele talked about the country’s plans to issue a $1 billion “bitcoin bond,” a tokenized financial instrument developed by Blockstream, on the Liquid Network. $500 million of the total $1 Billion will be used to help construct needed energy and bitcoin mining infrastructure and $500 million to buy even more bitcoin.

The Bitcoin Bond offering initially planned to be issued in mid-2022 had to postpone several times owing to unfavorable market conditions. Paolo Ardoino, chief technical officer at Bitfinex, states the Volcanic token has widespread support in the Bitcoin community, and there exists manifestly a great appetite for the offering irrespective of it being a bear or bull market.

The country states that the passing of the digital securities law offers “unprecedented consumer protection from bad actors in the ‘crypto’ space while firmly establishing that we are open for business to all who wish to build the future with us on bitcoin.”

Saniya Raahath
Saniya Raahath

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