El Salvador: $1 Billion in Bitcoin Bonds

El Salvador’s proposed digital securities law opens the door to Bitcoin Volcano Bonds and their mission to raise $1 billion to fund government activities. 

El Salvador: digital securities bill opens the door to Bitcoin Volcano Bonds

A bill to regulate digital securities was presented to the Parliament of El Salvador in recent days, paving the way for the issuance of the long-awaited Bitcoin Volcano Bonds. 

Doing so was the country’s Economy Minister María Luisa Hayem Brevé, who aims to establish a National Digital Asset Agency that would oversee the regulation of digital asset issuers, service providers and other participants involved in the “public offering process” of digital securities.

The agency is the Bitcoin Funds Administration Agency (ABB) and will be a public law institution with its own legal personality and assets, technical characteristics, and economic, financial, and administrative autonomy. 

Not only that, AAB will also be empowered to establish offices abroad, as well as in the country of El Salvador itself. 

Included among the activities the agency will be able to do is to invest the funds received through public offerings of digital assets made by the State of El Salvador, such as Bitcoin Volcano Bonds. 

El Salvador: the Bitcoin Volcano Bonds and raising $1 billion for the government

Designed exactly one year ago, the Bitcoin Volcano Bonds aim to raise $1 billion in market financing, dedicated to government enterprises such as the construction of Bitcoin City. 

The name “Volcano” recalls one of the most important projects the country intends to finance, and that is the creation of a Bitcoin mining farm powered by the energy of a volcano. 

Given the huge campaign against the “energy waste” and “unsustainability” of classic mining, El Salvador’s new mining farm would propose a greener version for Bitcoin. In fact, the volcano energy available in large quantities in the Central American country turns out to be cleaner. 

With the volcano-powered mining farm, the country of El Salvador would secure some sort of return, assuming that revenues exceed expenses. In contrast, the International Monetary Fund has warned that the issuance of Bitcoin Volcano Bonds, being bonds, would increase the country’s already substantial debt.  

A first concrete step after a year of postponement

This Bitcoin Volcano Bonds story has undergone several postponements over the past year. Indeed, after the official announcement last November 2021, the Bitcoin-backed bond launches were postponed to December 2021, then March 2022, June 2022, and finally, last September 2022. 

Regulatory difficulty seems to have been the motivation for postponement each time, in addition to also the bearish crypto trend that has characterized the entire year since the long crypto winter. 

At the time of writing, BTC is trading at $16,658, nowhere near what it was last year in November, when BTC was at its ATH – All Time High – of $67,000.

In any case, the current bill, which has yet to be approved by a majority in El Salvador’s Congress, appears to be a new concrete step toward the realization of the $1 billion Volcano Bonds. 

The involvement of Paolo Ardoino of Tether and Bitfinex

In the run-up to El Salvador’s Bitcoin Volcano Bonds, while there are those who criticize the move like the IMF, there are those, on the other hand, who support it, like Paolo Ardoino, CTO of Tether and Bitfinex. 

Digital securities law will enable El Salvador to be the financial center of central and south America.
🇸🇻 https://t.co/1QBcrjxQCC

— Paolo Ardoino 🍐 (@paoloardoino) November 23, 2022

“Digital securities law will enable El Salvador to be the financial center of central and south America.”

Ardoino’s support also stems from the fact that the Bitfinex crypto-exchange would have to obtain a license in order to process and list the issuance of bonds in El Salvador.

Essentially, such bonds would pay a yield of 6.5%, allowing accelerated citizenship for investors. 

Once the initial $500 million is monetized, the government will share half of the additional earnings with investors in the form of a Bitcoin dividend. These dividends will be distributed annually using Blockstream‘s asset management platform.

The partnership with Lugano

Last month, the city of Lugano formed a partnership with the Republic of El Salvador by officially signing a Memorandum of Understanding of Economic Cooperation. 

The signatures of that agreement were performed by Lugano Mayor Michele Foletti and El Salvador’s ambassador to the US, Milena Mayorga.  

The announcement of the collaboration was made during the Plan B Forum event in Lugano, which brought together international experts in the Bitcoin and Blockchain world. 

Plan B was founded by Tether and the city of Lugano, which, together with GoCrypto, formalized payments in Bitcoin, Tether and LVGA in the Swiss city.