The Issuance of Digital Assets legislation will create a regulatory body and establish a legal framework for all digital assets.
El Salvador has passed landmark legislation that provides the legal framework for a bitcoin-backed bond – known as the “Volcano Bond” – that will be used to pay off national debt and finance the construction of a proposed “Bitcoin City”.
The draft law was adopted on January 11 with 62 for and 16 against and will become law after the consent of President Bukele.
El Salvador’s National Bitcoin Office announced the passage of the law in a Twitter thread on January 11, indicating that it will soon begin issuing bonds.
According to the bond technology provider, crypto exchange Bitfinex, the Vulcan Bond – or Vulcan Tokens – will allow El Salvador to raise capital to pay off its sovereign debt, finance Bitcoin City and create a Bitcoin mining infrastructure.
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The volcanic description for the bonds stems from the location of the country’s Bitcoin City, which will become a renewable crypto-mining hub powered by hydroelectric power from the nearby Conchagua volcano.
Bitfinex notes that the city will be a special economic zone, similar to that seen in China, that will offer tax breaks, crypto-friendly regulations and incentives for bitcoin businesses to its residents.
The bonds aim to raise $1 billion for the country, half of which will go toward building a special economic zone.
According to the initial proposal, the tokenized bonds will be denominated in US dollars, with a maturity of ten years and an annual interest rate of 6.5%.
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Samson Mou, a Bitcoin spokesperson involved in the development of the Vulcan token, told Cointelegraph that the passage of the law will help make the country a “major” financial center.
“The move to enact a new digital securities law and enable new instruments such as Bitcoin bonds will help El Salvador pay off its existing debts and will be critical to making the world a major financial center .