El Salvador govt seeks Congress approval to issue bitcoin-backed bonds

The government of El Salvador, the first country in the world to adopt bitcoin as legal tender, is seeking congressional approval to issue investment bonds in the cryptocurrency.

El Salvador’s government-controlled legislature announced late on Tuesday it had received a bill dubbed the “Digital Assets Issuance Law,” aimed at regulating the offering of such bonds to local and foreign investors.

The proposal comes a year after President Nayib Bukele announced he would launch so-called “volcano bonds” to raise $1 billion to finance his “Bitcoin City” project, which included building a town on the Salvadoran coast funded by bitcoin-backed bonds.

Bukele later revealed the bonds were named after El Salvador’s 170 volcanoes, which would provide geothermal energy to support bitcoin mining projects.

He initially expected the bonds to be ready for launching at the beginning of this year, but according to Finance Minister Alejandro Zelaya they were delayed due to economic instability stemming from the war between Russia and Ukraine.

The newly proposed bill, according to its draft, is aimed at creating the Bitcoin Fund Management Agency (AAB) to oversee, safeguard and invest funds obtained from digital asset offerings and the National Commission for Digital Assets to oversee the issuance of bitcoin-backed bonds.

El Salvador, which has a high external debt and largely depends on money coming from abroad – especially from the United States – adopted the cryptocurrency as legal tender in September 2021, with Bukele justifying the measure as a way to bring prosperity to the country.

So far, the Bukele administration has bought 2,392 bitcoins at a price of some $107 million, according to private estimates, though the bitcoins are now 63 per cent less valuable after a recent price collapse.