For Issuing Bitcoin Bond El Salvador Government Introduces 20 Bills To Render Legal Framework

• The 20 bills will help El Salvador’s government establish the legal and financial framework for the Volcano Bonds, the $1 billion Bitcoin bond issue.

• President Bukele also said that the government would render geothermal energy, digital and technological education, and efficient and sustainable public transport for the entire city. However, he didn’t give any timeline.

• Alejandra Zelaya, Head of the Treasury, pointed out significant interest from investors in the Bitcoin Bond since it also offers BTC exposure and a 10-year maturity of 6.5% interest.

With President Bukele as its head, the government of El Salvador has decided to move forward with its plans to issue Bitcoin bonds, which will be executed by preparing 20 bills created for providing a legal framework for them.

On Jan 4, Alejandra Zelaya, Head of the Treasury, told a media company in El Salvador that for ensuring the viability of the Bitcoin bonds presented in Nov 2021, the bills will cover regulations about issuing securities as cryptocurrency.

President Bukele also promised that the government would render legal certainty and structure to anyone who buys the bitcoin bond.

Nonetheless, he did not inform about the time period for the legislation to be submitted to lawmakers.

Also, the $1 billion will be taken from the bond issuance for the Bitcoin city initiative. President Bukele also said that they would be providing efficient and sustainable public transport, geothermal energy for the entire city, and digital and technological education.

Among the features of Bitcoin city is the Bitcoin Mining Operation that harnesses the geothermal power generated by a volcano for powering the mining rigs, which led to the bonds being named “Volcano Bonds.” On Oct 1, 2021, the first mining operation mined its first 0.00599179 Bitcoin.

Funds from the bond issue could also be utilized for paying an $800 million Eurobond issue that will mature in Jan 2023. Zelaya also said that instead of another Eurobond issue, the country would need financiers for fulfilling their obligation to pay off the Eurobonds that can come from Bitcoin Bonds or through institutional offers of various investment banks. 

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Zelaya said that payments could be processed even without creating another Eurobond in the traditional market, suggesting that the country should find a bond denominated in dollars and get payments in Bitcoin.

Eurobond is nothing but a debt tool for countries, who want to collect funds in any denomination but theirs.

Zelaya also pointed out there is remarkable interest in the Bitcoin Bond from investors since it offers exposure to BTC and a 10-year maturity of 6.5% interest.

However, the issuance bond will not be preventing the nations in Central America from taking part in traditional finance. Zelaya made it clear that it would not abandon the traditional market.

Blockchain developers such as Blockstream and iFinex, closely associated with stablecoin Tether (USDT), are prominent partners with El Salvador. 

The Bonds will be processed by iFinex and are expected to be issued on Blockstream’s Liquid Network.

On New Year’s day, President Bukele, among his predictions, including his prediction that the Bitcoin price will hit $100,000, also predicted that the construction of the Bitcoin city would also begin and the Volcano bonds shall be oversubscribed.