El Salvador, under the leadership of President Nayib Bukele, is moving forward with its 2021 plans to issue Bitcoin bonds (quotation BTC). The country has now prepared 20 bills to provide a financial and legal framework for the bonds.
Speaking to El Mundo Salvadoran media, Treasury Chief Alejandra Zelaya said the bills cover the rules on issuing securities as a cryptocurrency. This, he says, will ensure the viability of Bitcoin bonds:
"[This is] to provide a legal framework and legal certainty to all who buy the Bitcoin bond."
However, El Salvador has not currently provided a timeline for when the series of bills will be passed on to lawmakers.
El Salvador's plans for Bitcoin bonds
According to Bukele, the $ XNUMX billion acquired through the bond issue will be used to finance Bitcoin City. The initiative, he notes, will provide "digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transport".
The bonds are commonly referred to as “Volcano Bonds,” since the Bitcoin City they are to build will use the geothermal energy of a volcano to power Bitcoin mining facilities. Mining operations began on October 1, when the plants generated the first 0,00599179 BTC. Part of Bukele's 2022 prediction is that the city will start construction this year.
To create the bonds, El Salvador partnered with cryptocurrency firms Blockstream and iFinex. The former has a liquid network where bonds will be issued while the latter processes them.
We will not abandon the traditional market
Funds obtained from Volcano bonds could also be used to pay for the country's $ 800 million Eurobond issue that expires in January 2023. The latter is a debt instrument that facilitates a country's fundraising in the country's currency. a denomination other than your own. Zelaya also said El Salvador could pay for Eurobonds with "institutional offers from various investment banks" - a better alternative to getting another Eurobond.
"We can simply make payments without creating another Eurobond in the traditional market, and we can find a bond that is denominated in dollars and receives payment in Bitcoin."
Zelaya said El Salvador's issuance of Bitcoin bonds will not discourage its participation in traditional finance, saying: “We have no intention of abandoning the traditional market”.
He added that Bitcoin bonds have generated significant investor interest. This, he says, is because they offer exposure to BTC and have a ten-year maturity at an interest rate of 6,5%. Zelaya's statement compliments another of Bukele's 2022 predictions that "Volcano bonds will be overwritten."
