El Salvador progresses with Bitcoin bond plans

05 Jan 2022

The government of El Salvador has advanced with plans to issue Bitcoin bonds by unveiling 20 bills aimed at providing a legal framework.

According to Head of the Treasury, Alejandra Zelaya, the bills will cover regulations in regard to issuing securities as cryptocurrency to ensure the feasibility of the Bitcoin bonds, announced in November last year. 

The Treasury chief commented: "[This is] to provide a legal structure and legal certainty to everyone who buys the Bitcoin bond." 

That said, he didn’t put forward a schedule for the legislation to be submitted to lawmakers, reports Cointelegraph. 

According to El Salvador’s President Bukele, the $1 billion sought by the issuance of the bonds would be utilised to finance the so-called Bitcoin City plans, to provide “digital and technological education, geothermal energy for the entire city, and efficient and sustainable public transport.” 

A principal feature of the Bitcoin City is a Bitcoin mining operation that uses volcano-generated geothermal power to fuel the mining rigs, with the bonds known as ‘Volcano Bonds’. At the beginning of October 2021, the operation mined its first 0.00599179 Bitcoin.

In addition, funds stemming from the bond issuance may be used to finance an $800 million Eurobond issue, set to mature in January next year. According to the Head of the Treasury, El Salvador would require financiers to help fulfil the obligation to repay the Eurobonds, which may arise from Bitcoin bonds or “institutional offers from various investment banks,” as opposed to another Eurobond issue.  

“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,” he added. 

President Bukele tweeted his predictions for this year earlier this week, including that “Bitcoin City will commence construction,” and “Volcano bonds will be oversubscribed.”