El Salvador Makes a First Step Towards Issuing Volcano Bonds for Bitcoin

The debut of El Salvador’s bitcoin-backed “volcano” bonds was made possible by the submission of a bill authorizing the issuing of digital assets to the nation’s legislative assembly by Minister of the Economy Maria Luisa Hayem Brevé.

The innovative project, which was first introduced today, aims to draw finance and investors to El Salvador. Plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, were made public at the time. Proceeds from the bonds would be split between a $500 million direct allocation to bitcoin and an investment of the same amount in the development of the area’s energy and bitcoin mining infrastructure.

A sidechain is a separate blockchain that operates in tandem with another blockchain and enables the secure usage of tokens from the main blockchain while adhering to a different set of guidelines, performance standards, and security measures. With a two-way peg, Liquid’s sidechain for Bitcoin enables bitcoin to move between the Liquid and Bitcoin networks. L-BTC is a symbol for bitcoin that is used on the Liquid network. The network’s users, known as functionaries, administer and secure its verifiably comparable amount of Bitcoin.

El Salvador will be able to serve as the financial hub of Central and South America thanks to the adoption of digital securities law, wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.

To conduct and list the bond issuance in El Salvador, Bitfinex will soon receive a license.

Investors will be able to obtain citizenship quickly through the bonds, which will yield 6.5%. Once the first $500 million has been monetized, the government will distribute half of the additional gains to investors as a Bitcoin Dividend. The asset management platform of Blockstream will be used to distribute these dividends on an annual basis.

The first significant step before the bonds may be issued is the submission of the bill, which was alluded to earlier this year. After that comes approval, which is anticipated to occur before Christmas, according to a source close to President Nayib Bukele, who is quoted in Bitcoin Magazine. The proposal was made on November 17 and was made today to the nation’s Congress. The entire thing is embedded below.