El Salvador Has Just Approved Law to Allow it to Issue Bitcoin Denominated Bonds

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Source: AdobeStock / MMollaretti

El Salvador’s Congress has passed a digital securities law that will allow the nation to issue bitcoin-backed bonds, also known as volcano bonds.

The Legislative Assembly of El Salvador approved the bill on 11 January by a vote of 62 against 16. The bill will become law after being ratified by President Bukele.

El Salvador’s National Bitcoin Office (ONBTC), a “special administrative unit” tasked with coordinating and consulting on all bitcoin-related projects in the country, also announced the news on Twitter, noting that That it will soon start issuing bonds. it Told,

“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 volcanic bonds known as We will start releasing soon.”

President Nayib Bukele initially announced bitcoin-backed bonds with the intention of establishing the world’s first “Bitcoin City” in November 2021. He plans to fund the city’s development by raising $500 million through bitcoin-backed bonds.

According to the President, the city will have residential sections, commercial areas, museums, entertainment venues, an airport, railways and other important infrastructure. It will be built in the southeastern district of La Union and will have a circular shape similar to a giant coin.

The government also plans to raise another $500 million in reserves to buy bitcoin, with any appreciation in the digital currency eventually shared with bondholders.

Notably, despite plans to launch bitcoin-backed bonds a year ago, Bukele has been forced to delay His release was due to “economic instability stemming from the war between Russia and Ukraine”. At the end of 2022, it was reported that the nation’s Parliament receives a digital securities bill which will enable the launch of the bond.

Meanwhile, credit rating agencies and the International Monetary Fund (IMF) have consistently criticized the plan. one in Statement Last year, the IMF said that bitcoin poses significant risks to financial stability and consumer protection in El Salvador.

Bukele has become a full-fledged bitcoin enthusiast over the years. their country, which Adopted Bitcoin as legal tender in June 2021 has also led to millions directly investing in the leading cryptocurrency.

According to public records, the El Salvador currently holds 2,381 BTC purchased at an average purchase price of $43,357. Bitcoin is currently trading around $18,100, with BTC holdings by El Salvador valued at $43.2 million. El Salvador fell short by over $60 million on its BTC investment as the country spent around $103.23 million on its BTC purchases.

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