El Salvador’s Parliament approves law to issue Bitcoin bonds

The Salvadoran Parliament passed a law providing the legal basis for issuing digital assets, including Bitcoin-based bonds.

#Plenaria90✍🏻 Con 62 votos a favor, creamos la Ley de Emisión de Activos Digitales. pic.twitter.com/g1poXwLoH3

— Asamblea Legislativa 🇸🇻 (@AsambleaSV) January 11, 2023

Authorities began examining the document, intended to bring order to the regulatory framework governing interactions with issuers of virtual assets and users, in November 2022. 

«The law also paves the way for Volcano Bond, which we will soon begin issuing», said the National Bitcoin Office of El Salvador (ONBTC).

Today El Salvador builds on our first-mover advantage by passing landmark legislation establishing a legal framework for all digital assets that are not bitcoin. As well as those issued on bitcoin.

The law also paves the way for volcano bonds which we will soon begin issuing.

— The Bitcoin Office (@bitcoinofficesv) January 11, 2023

The idea of this tokenised security was first floated in July 2022, when Bitfinex announced a partnership with Salvadoran authorities on Bitcoin initiatives. 

The issuance is expected to raise $1 billion. According to Bitfinex’s statement, funds would be used to repay sovereign debt, build mining infrastructure, and finance Bitcoin City.

After the first cryptocurrency was recognised as legal tender in September 2021, El Salvador already in the following month began mining digital gold using geothermal energy from the volcano. 

In November 2021, President Nayib Bukele announced plans for Bitcoin City along the Gulf of Fonseca. The city is planned to be a special economic zone with no taxes on income, property, capital gains, or wages. 

To power it, a geothermal power plant will be built near the volcano. Its capacity will also be used for Bitcoin mining.

Despite statements about issuing Volcano Bond in March 2022, authorities throughout that year delayed the issue of security tokens, citing unfavourable conditions. 

«El Salvador is at the epicentre of Bitcoin adoption and, therefore, economic freedom, financial sovereignty, resistance to censorship, and non-confiscatable wealth. When we issue the first Volcano Bond, we will once again open the path for advancing this monetary revolution», said ONBTC.

The law also provides protections for issuers and consumers in the crypto space against fraud. The new National Commission on Digital Assets will oversee and regulate the space.

Earlier, in July 2022, the country’s finance minister Alejandro Zelaya said that legalising Bitcoin had brought benefits to El Salvador, despite the price drop.

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