El Salvador is getting closer to executing Bitcoin-backed “Volcano bonds.”
El Salvador's Digital Assets Commission has authorized the issuance of Volcán bonds, which are sovereign debt financial instruments backed by Bitcoin, with which the country seeks, among other things, finance the development of Bitcoin City and increase their holdings in the cryptocurrency, supporting the acquisition of more Bitcoin and the construction of new crypto mining facilities.
On December 11, the National Bitcoin Office, a department of the Presidency of the Republic of El Salvador that was created to promote cryptocurrency-related projects in the country, reported that the so-called volcano bonds received regulatory approval from the Digital Assets Commission (CNAD) and that these will possibly be issued as early as the first quarter of 2024.
Progress in preparations for the issuance of Volcán bonds
El Salvador had announced its plans to issue Bitcoin-backed bonds in November 2021. However, these plans have faced several challenges, such as the bear market for cryptocurrencies in 2022, general macroeconomic conditions, the lack of appropriate regulation for these bonds, and other internal issues of the country, such as the reform of workers' pensions. All of these have been the main reasons that have led El Salvador to postpone the issuance of the Volcán bonds many times.
Now, from 2021 to date, El Salvador has made significant progress in its preparation for the issuance of Bitcoin-backed bonds.
The nation already has a digital securities law, which was approved in January of this year and with which it now has an appropriate legal framework to support the placement of the bonds. Likewise, the crypto market is moving away from the bearish trend and many of the main cryptocurrencies, including Bitcoin, have recovered substantially this year. Also, the platform on which the Volcán bonds will operate is already registered in El Salvador, generating greater expectations about the issuance of the expected Bitcoin bonds.
The latest step forward for the nation towards the issuance of Volcán bonds is the approval granted to them by the CNAD, the entity responsible for the digital asset ecosystem in the country.
Bitcoin opens the way to new capital markets
El Salvador's National Bitcoin Office emphasized that with the regulatory approval that the Volcán bonds have received, the doors are opening to new Bitcoin-based capital markets in the country. Through these bonds, El Salvador hopes to raise $1.000 billion, which will finance the first stages of construction of Bitcoin City.
On the other hand, the president of the nation, Nayib Bukele, confirmed on their social networks the approval of these bonds, commenting “The volcano bond?” and retweeting several posts related to these financial instruments. The regulatory approval of Bitcoin bonds represents a step forward in El Salvador’s conviction to become a Bitcoin nation and to expand access to cryptocurrencies.
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