The El Salvador legislative arm has passed a significant cryptocurrency framework. This development was announced in a recent Twitter post by the National Bitcoin Office in the country. As revealed, the framework emanated to allow Bitcoin-backed bonds, termed as Volcano Bond.
Notably, El Salvador intends to use the Volcano bond to pay down sovereign debt. Also, it plans to leverage the bill to finance the construction of its proposed Bitcoin City. As revealed, the bill passed with 62 votes for and 16 against. Occasioned by this development, the framework is expected to become law after its approval by the country’s President, Nayib Bukele.
According to El Salvador national bitcoin office, the issuance of the bonds would commence soon. The office also announced Bitifinex exchange as the technology provider for the Volcano bond. Serving as the technology provider of the bond, Bitifinex believes the development will allow El Salvador to raise capital to pay down its sovereign debt, fund the construction of its Bitcoin city and establish bitcoin mining infrastructure.
As revealed by Bitfinex, the volcano descriptor for the bonds emanated from the location of the country’s Bitcoin City. Notably, El Salvador wants to make the city a renewable crypto-mining hub, powered by hydrothermal energy from the nearby Conchagua volcano. According to the exchange, the country plans to evolve the city to become a special economic zone, similar to that of China. Meanwhile, the city aims to offer tax advantages, crypto-friendly regulations, and incentivized bitcoin businesses to residents.
El Salvador seeks to raise $1 billion with the bond
Meanwhile, El Salvador expects to raise about $1 billion with the bond. Notably, it plans to invest half of this fund in building a special economic zone. The tokenized bonds also carries ten-year maturity date with a 6.5% annual interest rate.
Reacting to the development, one of the developers of the Volcano token, Samson Mow discussed the significance of the bill. According to Mow, the new bill possesses the tendency to turn the country into a major financial hub. He further that the move to enable new instruments like the Bitcoin Bonds tends to help El Salvador pay off its existing debts. Also, Mow says the development helps in revamping the country into becoming a major financial center of the world.
Worth noting that the bill also creates a legal framework for other cryptocurrencies like Ether. In addition, it creates a new regulatory agency that oversees the application of securities law and protects users from bad actors.