El Salvador’s administration, commanded by President Nayib Bukele, has advanced preparations to issue Bitcoin bonds by drafting 20 legislation to establish a legal basis for them.
On January 4, Treasury Secretary Alejandra Zelaya informed El Mundo in El Salvador that the laws will contain procedures for selling securities in cryptocurrencies to assure the sustainability of the Bitcoin bonds announced in November 2021.
He could not, unfortunately, give a timetable for the legislation’s submission to parliamentarians.
The $1 billion requested by the bond offering will be utilized to support President Bukele’s Bitcoin City plan, which he promises would offer “digital and technical training, geothermal energy for the whole city, and effective and ecological public transportation.”
Another of the Bitcoin City’s attractions is a Bitcoin (BTC) mining facility that uses geothermal electricity produced by a volcano to energize the mining rigs, earning the bonds the moniker “Volcano Bonds.” On October 1, 2021, the mining activity mined its first 0.00599179 Bitcoin.
The bond proceeds might also be utilized to pay off an $800 million Eurobond issuance that will be due in January 2023. According to Zelaya, the nation will have to seek financiers to assist them to meet their commitment to pay the Eurobonds, which might come via Bitcoin bonds or “institutional proposals from different investment institutions,” instead of additional Eurobond issues.
A Eurobond is a financial instrument that allows governments to obtain financing in a coin other than their own.
Investors are interested in the Bitcoin bond, according to Zelaya, since it provides access to BTC and a 10-year maturity at 6.5 per cent interest.
The issue of Bitcoin bonds, though, will not stop the Central American country from engaging in conventional loans. “We are not intending to forsake the conventional market,” Zelaya stated.
Prominent collaborators in the construction of the Volcano Bonds with El Salvador comprise blockchain developer Blockstream and iFinex, which is intimately linked to stablecoin Tether (USDT). The bonds will be released on Blockstream’s Liquid Network and will be handled by iFinex.
On January 2, President Bukele predicted that “Bitcoin City would begin building” and “Volcano bonds would be oversubscribed” in 2022.