El Salvador’s ambitious plan to issue Bitcoin bonds, dubbed “Volcano Bonds,” has received regulatory approval from the country’s Digital Assets Commission (CNAD). The announcement, made by the National Bitcoin Office (ONBTC), marks a significant step forward for the issuance of Bitcoin-backed bonds in the country.
El Salvador’s President, Nayib Bukele, endorsed the news by retweeting confirmation posts, expressing enthusiasm for the development. The ONBTC indicated that it anticipates the bonds to be issued during the first quarter of 2024 and specified that Bitfinex Securities Platform would host the issuance.
The concept of “Volcano Bonds” stems from the proposed utilization of the Conchagua volcano to power Bitcoin mining rigs, reflecting the country’s innovative approach to integrating cryptocurrency into its economic and infrastructure plans. President Bukele initially unveiled plans for Bitcoin bonds shortly after El Salvador’s groundbreaking Bitcoin Law, which designated Bitcoin as legal tender in 2021.
The original vision included issuing $1 billion in bonds in 2022, with a portion converted to Bitcoin and the remainder allocated to infrastructure development and Bitcoin mining. The funds were intended to support the construction of a “Bitcoin City,” a tax-free enclave aimed at fostering an ecosystem favorable to Bitcoin enthusiasts.
However, the issuance faced delays, attributed to factors such as market volatility and geopolitical tensions, including the conflict between Russia and Ukraine. Legislative frameworks to support the issuance of Bitcoin-backed bonds were established in January 2023.
El Salvador’s pursuit of Bitcoin-based initiatives has encountered resistance from international organizations, notably the International Monetary Fund (IMF). The IMF has urged the country to reconsider its Bitcoin Law, citing concerns about macroeconomic, financial, and legal implications.
In addition to the “Volcano Bonds,” El Salvador has continued its pro-Bitcoin stance with initiatives like the “freedom visa” program, inviting foreign investors to gain residency by investing $1 million in Bitcoin or Tether within the country. Furthermore, El Salvador has been strategically accumulating Bitcoin as part of its reserves to mitigate the impact of inflation.
The regulatory approval for the Bitcoin bonds reflects El Salvador’s determination to position itself at the forefront of Bitcoin adoption and innovation, despite ongoing global debates surrounding the integration of cryptocurrencies into traditional financial systems.