El Salvador’s government has planned to issue Bitcoin (BTC) bonds by preparing 20 bills designed to provide a legal framework for them.
Alejandro Zelaya, the Head of the Treasury, said that the bills will cover regulations about issuing securities as cryptocurrency to ensure the viability of the Bitcoin bonds that were proposed in November 2021.
He added:
“[This is] to provide a legal structure and legal certainty to everyone who buys the Bitcoin bond.”
It has been reported that he did not propose a timeframe for the legislation to be submitted to lawmakers. The $1 billion sought by the bond issuance would be used to fund the Bitcoin City initiative, which President Bukele has promised will provide “digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transport.”
However, one of the features of the Bitcoin City is a Bitcoin mining operation that harnesses the geothermal power generated by a volcano to power mining rigs, leading to the bonds being dubbed “Volcano Bonds.” The mining operation mined its first 0.00599179 BTC on October 1, 2021.
The report said that funds from the bond issue could also be used to pay down an $800-million Eurobond issue, which will mature in January 2023.
Zelaya said that the country would need to find financers to help fill their obligation to pay off the Eurobonds, which could come from Bitcoin bonds or from “institutional offers from various investment banks” rather than another Eurobond issue.
He added:
“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.”
Likewise, Zelaya also indicated that there is significant interest in the Bitcoin bond from investors, as it offers exposure to BTC and a 10-year maturity of 6.5% interest. The issuance of Bitcoin bonds would not, however, preclude the Central American nation from participating in traditional finance.
He said:
“We are not going to abandon the traditional market.”
Thus, notable partners with El Salvador in the creation of the Volcano Bonds include blockchain developer Blockstream and iFinex, the latter of which is closely related to stablecoin Tether (USDT). The bonds are expected to be issued on Blockstream’s Liquid Network and processed by iFinex.
Source: Cointelegraph