El Salvador recently approved a game-changing law that will create the legal basis for a Bitcoin-backed bond, named the "Volcano Bond". This bond will help reduce the country's sovereign debt and finance the building of a "Bitcoin City".

A decisive majority of 62 legislators voted for the bill with only 16 standing against it, and the President is scheduled to ratify the law to bring it into effect.

On January 11th, the National Bitcoin Office of El Salvador shared in a thread on Twitter that a bill was passed and that they would start distributing the bonds shortly afterwards.

Bitfinex, a crypto exchange and the technology provider for the bonds, has reported that the Volcano Token would enable El Salvador to secure needed funds to reduce its national debt, build the Bitcoin City, and set up crypto-mining infrastructure.

The Volcano title in this context is derived from the vicinity of the Bitcoin City to the Conchagua volcano, around which will be constructed a renewable mining site powered by hydrothermal energy.

Bitfinex has stated that the city will be a specialized economic zone akin to those in China, providing tax positives, regulations that are friendly with cryptocurrencies, and other incentives to bring Bitcoin ventures to the city's inhabitants.

It is projected that the bonds should raise $1 billion for the sovereignty, with half of it going towards constructing the economic zone. The bonds will be issued in U.S. Dollars, have a maturity period spanning a decade, and bear an annual interest rate of 6.5%.

According to Samson Mow, a main proponent in the invention of the Volcano Token, if the bill were to pass it could transform the country into a leading financial center. The bill also includes regulations for digital assets beyond Bitcoin, including tokens issued through Bitcoin, and it establishes a new regulatory entity which will be responsible for adhering to security laws and create safeguards against bad actors.



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