El Salvador’s government, led by President Nayyib Bukele, has moved ahead with its plans to issue Bitcoin Bonds (BTC) with 20 bills designed to provide the legal basis for doing so.
Finance Minister Alejandro Zelaya told El Mundo Media on Tuesday that the bills will cover rules regarding the issuance of securities as cryptocurrencies to ensure the validity of the proposed Bitcoin bonds in November 2021. He said:
“[This is] to provide a legal structure and legal certainty for everyone who buys bitcoin bonds.”
However, he did not offer a timeline for sending the law to lawmakers.
The $ 1 billion requested by the bond issuer will be used to fund the Bitcoin City initiative, which President Bukele has pledged to provide “digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transport.”
One of the features of Bitcoin City is the Bitcoin mining operation, which uses the geothermal energy generated by the volcano to power the mining rigs, resulting in the formation of bonds called “Volcano Bonds.” On October 1, 2021, the mining industry returned 0.00599179 of the first bitcoin.
The bond issue can also be used to redeem a $ 800 million Eurobond issue due in January 2023. Zelaya told El Mundo that the country needs to find financiers to meet its Eurobond redemption obligations, which could come from bitcoin bonds or “institutional offers from various investment banks” instead of issuing other international bonds.
“We can just make payments without creating another Eurobond in the traditional market, and we can find a dollar-denominated bond that gets paid in Bitcoin.”
Eurobonds are debt instruments through which countries can raise money in currencies other than their own.
Zelaya also noted that investors are showing a lot of interest in Bitcoin Bonds as they offer access to BTC and a 10-year maturity of 6.5%.
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However, the issuance of bitcoin bonds does not exclude the possibility of a Central American country participating in traditional finance. “We’re not leaving the traditional marketplace,” Zelaya said.
El Salvador’s main partners in the creation of Volcano Bonds are blockchain developer Blockstream and iFinex, the latter of which is closely related to Stablecoin Tether (USDT). The bonds are expected to be issued on the Blockstream Liquid network and processed by iFinex.
On Sunday, Bukele tweeted his forecast for 2022, stating that “Bitcoin City will start building” and “Subscription for the volcano’s bonds will be exceeded.”