Recent legislation in El Salvador will allow for the legalization of a Bitcoin-backed bond. This bond, also known by the “Volcano Bond”, will be used for the reduction of country’s overall national debt as well to fund construction of the “Bitcoin City”, which is being envisioned for El Salvador.
On January 11, 62 people voted in favor of the measure and 16 people voted against it. It will be enacted as a statute once President Bukele approves it.
Bitfinex, the technology provider of the bonds, stated that the Volcano Bond, also known as Volcano Tokens would enable El Salvador raise capital to pay off its sovereign debt, build the Bitcoin City, and set up Bitcoin mining infrastructure. These goals can be achieved with the proceeds from the bond sale.
Because of the country’s Bitcoin City (located in the country), the bonds were given the volcanic name. This is a planned self-sustaining crypto-mining centre that will be powered by hydrothermal energy from the Conchagua volcano. The bonds were presented as an active volcano as a result.
Bitfinex says the city would be a special economic area, comparable to one found in China. This zone would provide tax breaks and friendly rules to residents. cryptocurrenciesYou can also offer incentives for them to start a Bitcoin-related business.
The issuance of these bonds is expected to generate one billion dollars for the nation, half of which will go towards the construction of the special economic area. First, it was suggested that the tokenized bonds would mature in ten years. They would also be denominated as U.S. Dollars and would have an annual interest rate 6.5%.
Additionally, the measure establishes a legal structure for all digital assets, including those issued on Bitcoin. A new regulatory body will also be established to administer securities legislation and protect against malicious actors.