El Salvador recently sanctioned legislation that provides legal protection for transferring or issuing debt with cryptocurrencies. However, this law is intended to foster a safe and secure digital assets environment in the country. This bill provides a legal basis for issuing “Volcano Bonds,” an innovative financial instrument backed by Bitcoin. Also, it will help Venezuela to pay its sovereign debt and finance the planned construction of Bitcoin City.
By a landslide majority, the bill was approved with 62 votes in favor and 16 against it. Once ratified by President Nayib Bukele, this legislation will officially become law.
After approving El Salvador’s Digital Securities Law, President Bukele expressed his joy and gratitude on Twitter: “We are thrilled with this accomplishment by our Legislative Assembly. With a resounding majority vote, we can now confidently move forward.”
El Salvador’s new legislation will distinguish cryptocurrencies from other forms of investments
At the end of November 2022, El Salvador marked a monumental moment by announcing their new bill. The National Bitcoin Office (ONBTC) issued a statement on behalf of President Bukele, revealing that this law will offer robust consumer protection from any malicious actors within the crypto space and invite businesses to join forces with El Salvador and build our collective future utilizing bitcoin.
The proposed bill divides cryptocurrencies from other investments or financial products, including digital versions of official currencies (CBDCs) managed by each country’s financial regulations. Crucially, this also distinguishes Bitcoin from other cryptocurrencies, categorizing it as digital security.
El Salvador’s new legislation has established the National Digital Assets Commission – a regulating agency dedicated to protecting digital asset purchasers and issuers and enforcing securities law. Also, this commission will also help deter fraudsters from conducting business in the country.
In 2021, El Salvador made history by becoming the world’s first nation to recognize Bitcoin as a legal tender. This decision has been lauded by numerous in the cryptocurrency community but harshly criticized by major international organizations and rating agencies. As such, citizens have expressed their disapproval of this law through multiple demonstrations.
Last November, President Bukele announced that his government would purchase one Bitcoin per day without detailing how long. This has become synonymous with the country’s name due to its enthusiasm for cryptocurrency purchases.
The ‘Volcano’ bonds project
In November 2021, President Bukele boldly moved to push El Salvador’s Bitcoin bond project forward. Also, this would involve issuing $1 billion in bonds on Blockstream’s Liquid Network – a secure and confidence-inspiring federated sidechain built atop Bitcoin.
The plan is to invest half of the resources into Bitcoin and use the remaining funds for constructing a fully-fledged Bitcoin City in the Eastern region. This tax-free hub will be specifically devoted to all those passionate about cryptocurrency, with geothermal energy sourced from local volcanoes powering it up.
The government’s original plan called for the issuance of volcano bonds, denominated in U.S. dollars, that pays 6.5% per annum over ten years with a five-year lock-up period. Additionally, these investors will receive expedited citizenship within the nation.
The government’s original plan called for the issuance of volcano bonds, denominated in U.S. dollars, that pays 6.5% per annum over ten years with a five-year lock-up period; additionally, these investors will receive expedited citizenship within the nation.
Initially, the project was slated to launch in March of last year. However, due to the turbulent markets and their subsequent crashes, its roll-out had to be pushed back multiple times.
With the passage of this new bill, El Salvador is now closer than ever to initiating the Volcano bonds project. Also, ONBTC has expressed that its issuance will start soon. Also, this marks an exciting period for El Salvador and its citizens as they move forward with their plans.
