El Salvador has passed landmark legislation to provide a legal framework for a Bitcoin-backed bond called the “Volcano Bond”. This ambitious bond will be used to pay down sovereign debt and fund the construction of Bitcoin City.
Passed on January 11, the bill was backed with 62 votes and 16 against. It will become law after it is ratified by El Salvador President Nayib Bukele. The National Bitcoin Office of El Salvador said the Central American country is the epicenter of Bitcoin adoption, and economic freedom, financial sovereignty, censorship resistance, and un confiscated wealth. El Salvador will be blazing the path forward for the new monetary revolution when it issues the first of the Volcano Bonds.
Bitfinex, the crypto exchange which is the technology provider for the Volcano Bonds, would allow El Salvador to raise capital to pay down its sovereign debt, fund the construction of the Bitcoin City and create a Bitcoin mining infrastructure. Bukele had said that Bitcoin City would become a renewable crypto-mining hub powered by hydrothermal energy from the nearby Conchagua volano. Bitfinex outlined the city would be a special economic zone similar to those in China. It would offer tax advantages, and crypto-friendly regulations and incentivize Bitcoin businesses for its residents.
Bukele aims to raise $1 billion through the bonds for El Salvador, whereby half of the funds would be used to build the special economic zone. The tokenized bonds, as per the proposal, would be denominated in US dollars, have a 10-year maturity date, and carry an annual interest rate of 6.5%.