ZoneBitcoin EditorialNayib Bukele, the young president of El Salvador continues to show his determination in its pro-bitcoin policy. He recently announced that he would buy one bitcoin every day, to highlight the positive results of the adoption of bitcoin in the country. Remember that in 2021, he made this small island in Latin America the first nation to legalize bitcoin.
After a year of preparation, a bill was submitted on November 17 to open the issuance of bitcoin-backed “volcano” bonds. Now, all that remains is for the project to be officially and definitively approved by the country’s Congress. The decision will be revealed in December of this year, according to the newspaper BitcoinMagazine.
💡 We call a “ obligation " or " bond " in English a portion of the debt issued by a state, a company or a community. It is a method of financing that may require the participation of several creditors.
The Volcano jump (the “Volcano” bonds)
It is still a unique initiative in the world to issue such bonds backed by bitcoin. However, government bonds of this type seem to be a particularly popular method for countries accepting bitcoin. The goal of the "Volcano Bond" is to attract foreign capital to El Salvador.
According to the Minister of Economy, Maria Luisa Hayem Brevé, the bonds could issue 1 billion dollars of bonds. The bonds would primarily be used to finance the country's energy and mining infrastructure. There would also be part of the funding intended for bitcoin mining. The "Volcano Bond" refers specifically to the country's many volcanoes as they are also said to be used for mining. The ultimate goal is to create a true international hub for bitcoin mining in El Salvador.
Technically, the bonds would be issued on Liquid Network, an independent sidechain created on the Bitcoin network (to improve its scalability among others). The use of the Liquid Network would then make it possible to carry out operations in complete security, taking advantage of the performance of Bitcoin's Proof-of-Work. The 1:1 representation of bitcoin used on Liquid Network is referred to as L-BTC.
Bond issues would be processed by the BitFinex platform for simpler operations management.
This is also the point of many controversies, because BitFinex due to its link with Tether, is currently being monitored by the SEC…The New York Attorney General is investigating Tether for its reserve irregularities…(see “ Tether/USDT affair")
What are the advantages of acquiring volcano bonds?
The El Salvador "Volcano" bonds will generate an estimated yield of 6,5%. The advantage given to investors will be the possibility of acquiring Salvadoran nationality. The acquisition of second passport is in fact a lever of attractions for largest holders of cryptocurrencies seeking to avoid crypto taxes and impositions.
The government of El Salvador has decided to distribute part of the additional earnings generated with investors in the form of dividend. The latter will be paid in Bitcoin annually, via the Blockstream platform (at the origin of the creation of Liquid Network). However, the evidence will be paid once $500 million of initial investment has been financed.
Submitting the bill, which was mooted earlier this year, initiates the first major step before the bonds can see the light of day. The next is to get it approved, which should happen before Christmas, a source close to the president said Nayib Bukele à Bitcoin Magazine.
If the bill is accepted, this would be a world first. Other countries could follow suit. Thus, the Central African Republic has also proposed a bitcoin bond system via the initiative sango. Obviously, this would also make bitcoin a new financial tool in the current global economic system.
Articles that might interest you:
—Nayib Bukele: “Stop drinking the Kool-Aid of the elites”
—Here's why the president of El Salvador wants to buy a Bitcoin every day
—Bitcoin Ekasi: A circular economy like Bitcoin Beach in El Salvador
—El Salvador accepts bitcoin as legal tender in the country
