Scheduled issuance of Bitcoin-backed bonds

El Salvador’s National Bitcoin Secretariat (ONBTC) announced on the 11th that the Bitcoin-backed bond Volcano Bond has been approved by the country’s Digital Assets Commission (CNAD).

This bond is scheduled to be issued in the first quarter of 2024 and is positioned as an initiative that symbolizes the start of Bitcoin-based capitalism.

On January 11, 2023, El Salvador passed the Digital Securities Law regarding Bitcoin-backed bonds. According to the plan at the time, Volcano bonds would be issued with approximately 140 billion yen ($1 billion) worth of Bitcoin as collateral to raise funds. It has a ten-year term and offers investors an annual yield of 6.5%.

The proceeds will be used to build a “Bitcoin City” that will receive tax benefits and to purchase large amounts of Bitcoin.

El Salvador is a developing country that has been plagued by political instability and economic difficulties for many years, but is also rich in natural resources.

In September 2021, President Najib Bukele, who became the first country in the world to make Bitcoin (BTC) legal tender, is promoting a Bitcoin mining project that uses renewable energy such as volcanic geothermal energy. BTC mining using volcanoes is called volcano mining.

This time, as part of efforts to support its development, financing through “volcano bonds” was planned.

I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanoes

This is going to evolve fast! pic.twitter.com/1316DV4YwT

— Nayib Bukele (@nayibukele) June 9, 2021

connection:I went to El Salvador where Bitcoin became legal tender | Experience contribution 1

According to ONBTC, the Volcano bonds will be issued on the blockchain-based digital stock exchange Bitfinex Securities. The platform is part of the cryptocurrency exchange Bitfinex and is registered in Kazakhstan’s Astana International Financial Center (AIFC) and El Salvador.

In addition, the International Monetary Fund (IMF) pointed out in February 2023 that the issuance of “Bitcoin bonds” should be reconsidered, citing the need to address risks to financial and fiscal stability and consumer protection.

El Salvador became the first country in the world to recognize Bitcoin as legal tender in 2021, and it is used as a payment method alongside the US dollar. In November 2022, President Najib Bukele attracted attention when he declared that he would “buy 1 BTC every day.”

President Bukele announced this month that unrealized gains on Bitcoin investments have turned positive. As of the time of publication, the company has made a profit of approximately 530 million yen ($3.62 million). As of November 2022, when FTX went bankrupt, the government held 2,381 BTC (current value = $99.81 million) at an average acquisition price of $44,300 (mainly purchases in 2021).

connection:Bitcoin investment in El Salvador turns positive with unrealized gains of approximately 530 million yen

El Salvador’s policy developments

Although El Salvador’s decision to make Bitcoin its legal tender is controversial, the rise in Bitcoin prices has begun to put the country’s financial sector’s growth and potential influence under scrutiny.

This month, advisors from US wealth management giant VanEck assessed El Salvador as having the potential to become a Singapore-like financial hub in the Americas. The company expected an influx of immigrants, capital investment, and general economic growth to continue in El Salvador.

In addition, Tether, the USDT issuer, has invested in the Bitcoin mining farm “Volcano Energy” in El Salvador. The project launched Lava Pool, a Bitcoin mining pool that utilizes volcanic resources, in October 2023, and provides 23% of profits to the country’s government.

President Nayib Bukele, who has been promoting Bitcoin policy, has been given permission to leave office for six months in preparation for the February 4, 2024 elections. He has won the support of the public for his strict crackdown on gangs and is seeking re-election.

connection:VanEck Advisor: “El Salvador has the potential to become the next Singapore”

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