El Salvador Passes Crypto Bill, Volcano Bond Soon To Become Reality 

El Salvador Passes Crypto Bill, Volcano Bond Soon To Become Reality 

El Salvador’s Legislative Assembly has voted to pass the Digital Assets Bill that will see the country regulate all cryptocurrencies excluding Bitcoin. The bill also paves way for issuing the world’s first bitcoin-backed sovereign bond. In 2021, El Salvador became the first country to establish BTC as legal tender. 

On Wednesday, the Legislative Assembly of El Salvador passed the landmark crypto bill that will allow the government to regulate all cryptocurrencies that are not Bitcoin (BTC). Also included was legislation for issuance of the much anticipated bitcoin-backed Volcano Bond. The bill has now gone to the desk of President Nayib Bukele who will sign it into law. 

According to the National Bitcoin Office of El Salvador (ONBTC), which announced the news in a Twitter thread on January 11, the passing of the Digital Securities Law will offer “unprecedented” protection for consumers from bad actors in the industry while also opening up the economy to anyone who wishes to invest in El Salvador’s crypto initiatives.

The legislation will also create the National Digital Assets Commission, which will be the regulatory body in-charge of imposing securities law on cryptocurrencies to protect the rights of buyers and issuers of the digital assets in the country. The Bitcoin Office also stated that it is moving ahead with issuing the BTC-backed bond. 

In November 2021, soon after becoming the first country to establish Bitcoin (BTC) as legal tender, President Bukele announced that his government is looking to raise $1 billion to launch the world’s first sovereign bond backed by the cryptocurrency. Digital asset infrastructure provider Blockstream and crypto exchange Bitfinex partnered with El Salvador’s government to raise capital for the project that will fund construction of the Bitcoin City and a mining farm powered by hydrothermal energy derived from the nearby Conchagua volcano. Hence the name Volcano Bond or Volcan Tokens. The use of renewable energy in mining new Bitcoin will make investment in the bond a very attractive prospect to both traditional and ESG (Environmental, Social, Governance) investors. 

The Bitcoin City will be a special economic zone, like free trade zones across the world, offering its residents tax advantages, crypto-friendly regulations and incentives for Bitcoin-related businesses. Out of the $1 billion that has been targeted to raise via the bond sale, $500 million will go towards building the mega project and the remaining half will be used to purchase more bitcoin to back the Volcano Token. 

According to the initial proposal submitted to the parliament in 2021 by Economic Minister Maria Luisa Hayerm Breve, the tokenized bonds will be denominated in U.S dollars with a ten-year maturity date and an annual interest rate of 6.5%. However, regulation for the bond which was supposed to pass in March 2022, was postponed several times due to extreme market conditions that saw many crypto companies file for insolvency. Last November, the federal government finally presented its Digital Assets Bill to the Legislative Assembly that is held in a majority by Bukele’s Nuevas Ideas (New Ideas) party. The proposed bill has been voted in favour by 62 legislators while 16 voted against, and will be enacted as law once ratified by President Bukele. 

At the time of writing, BTC is trading at $18,135 – up by 3.9% in the last 24-hours. 

Also Check: AWS And Avalanche Partner To Bring Blockchain Solutions For Governments And Enterprises

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