El Salvador has recently passed landmark legislation that will provide the legal basis for the issuance of a Bitcoin-backed bond in the country. This bond, also known as the “Volcano Bond”, will be used to reduce the country’s general debt, as well as to finance the construction of the “Bitcoin City” that is planned for El Salvador.

On January 11, 62 people voted in favor of the measure, while 16 people voted against it. When President Bukele gives his stamp of approval to the bill, it will be on its way to being signed into law.

As stated by cryptocurrency exchange Bitfinex, which is the technology provider for the bonds, the Volcano Bond, also known as Volcano Tokens, would make it possible for El Salvador to raise capital to pay off its sovereign debt, finance the construction of Bitcoin City, and create a Bitcoin mining infrastructure. All of these objectives could be achieved with the proceeds from the sale of the bonds.

The bonds were given the volcanic description due to the location of the country’s Bitcoin City, which is planned to become a self-sustaining crypto mining center that will be powered by hydrothermal energy obtained from the nearby Conchagua volcano. As a direct result of this, the bonds came in the form of an active volcano.

According to Bitfinex, the city would function as a special economic zone, analogous to those found in China. Such a zone would offer city residents tax breaks, friendly rules for CRYPTOCURRENCIESand other incentives to encourage them to participate in Bitcoin-related businesses.

It is expected that the issuance of these bonds will bring the country one billion dollars, of which half a billion will go to the construction of the special economic zone. The first hypothesis suggested that the maturity date of the tokenized bonds would be in ten years, that they would be denominated in US dollars and that they would accrue an annual interest rate of 6.5%.

Additionally, the move creates a legal framework for all non-Bitcoin digital assets, in addition to those issued in Bitcoin, and also establishes a new regulatory body that will be responsible for administering securities legislation and providing protection against malicious actors. .