Authorities of El Salvador prepared 20 bills, which will provide a legal framework for the issuance of Bitcoin (BTC) bonds. The local media El Mundo writes about this.
Thus, the laws, according to the head of the treasury, Alejandro Zelaya, will address regulations for issuing securities in cryptocurrency in order to assure the validity of the Bitcoin bonds proposed in November 2021. “[This is] to provide a legal structure and legal certainty to everyone who buys the Bitcoin bond,” he said.
However, he did not establish a date for the legislation’s submission to lawmakers. President Nayib Bukele has announced that the $1 billion raised from the bond offering will go toward the Bitcoin City plan. The latter will provide “digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transport.”
The Bitcoin City program
Furthermore, the Bitcoin City program includes a Bitcoin mining company that uses the geothermal power generated by a volcano to power mining equipment; earning the bonds the nickname “Volcano Bonds”.
Moreover, the money raised from the bond issue can also be used to pay down an $800 million Eurobond. The latter is a debt instrument that allows countries to raise financing in a currency other than their own. Instead of another Eurobond issue, Zelaya told that the country would need to find financiers; to help them meet their commitment to pay off the Eurobonds. Which might come through Bitcoin bonds or “institutional offers from various investment banks.”
“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,” Zelaya added. He also indicated that there is significant interest in the Bitcoin bond from investors. In addition, it offers exposure to BTC and a 10-year maturity of 6.5% interest.
1,370 BTC for El Salvador’s reserve
On the other hand, the issuance of Bitcoin bonds would not preclude the Central American nation from participating in traditional finance. “We are not going to abandon the traditional market,” Zelaya declared.
Recall that in September, the President of El Salvador published on Twitter a video; showing the preparation for Bitcoin mining at one of the geothermal energy facilities. The head of state added an emoji with an image of a volcano to the Bitcoin hashtag in a tweet. “The first steps,” Bukele wrote.
Nayib Bukele made five bullish forecasts for Bitcoin’s success in 2022 on January 2. As a countermeasure to the country’s rising inflation, El Salvador became the first government to embrace Bitcoin as legal tender last year under Bukele’s president. Since legalization, the president has purchased 1,370 BTC for the country’s reserve and spent the unrealized gains on new infrastructure projects, including as a hospital and a school.