Legislation establishing the legal framework for a Bitcoin-backed bond has been approved in El Salvador. The legislation, called “Volcano Bonds”, is expected to be used to pay off government debt and finance the construction of the proposed “Bitcoin City”. The bill was passed on January 11, with 62 votes “yes” and 16 votes “no”. It will be enacted after it is approved by El Salvador President Nayib Bukele.
El Salador’s National Bitcoin Office said in a January 11 Twitter announcement that the bill had been passed and that they would begin issuing bonds shortly. According to crypto exchange Bitfinex, the technology provider of the bonds, the legislation will pay off El Salvador’s government debt, fund the building of Bitcoin City, and allow it to raise capital to build Bitcoin mining infrastructure. The exchange also stated that Bitcoin City will create a special economic zone, as in China. The economic zone in question is expected to offer tax advantages and crypto-friendly regulations.
It was stated that the bonds will collect 1 billion dollars for the country and half of this figure will be used for the construction of the special economic zone. According to the first proposal, tokenized bonds will be denominated in US dollars, with a maturity of ten years and an annual interest rate of 6.5 percent. Samson Mow, a Bitcoin advocate who played a major role in the development of the bill passed in El Salvador, interviewed Cointelegraph. Mow told Cointelegraph that passing the bill would transform the country into a major financial center.
“The move to pass the new Digital Securities Law and enable new tools such as Bitcoin Bonds will help El Salvador pay off its current debts. However, it will not only be that old, it will play a critical role in transforming the country into a major financial center of the world.”
Finally, the bill will also provide a legal framework for digital assets other than Bitcoin. “Volcano Bonds” is also creating a new regulatory agency that will be responsible for enforcing securities law and providing protection from bad actors.