The launch of El Salvador’s Bitcoin-backed “volcano” bonds was made possible by the submission of a bill authorizing the issuance of digital assets to the nation’s legislative assembly by Minister of the Economy Maria Luisa Hayem Brevé.

The innovative project, which was first announced a year ago on the final day of Bitcoin Week 2021 by President Nayib Bukele and JAN3 CEO Samson Mow, aims to attract capital and investors to El Salvador.

The plan involves issuing $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, which were made public at the time. Proceeds from the bonds would be split between a $500 million direct allocation to Bitcoin and an investment of the same amount in the development of the country’s energy and Bitcoin mining infrastructure.

A sidechain is an independent blockchain that operates in parallel with another blockchain. Sidechains also enable the secure usage of tokens from the main blockchain onto its own network while adhering to a different set of guidelines, performance standards, and security measures. 

Liquid is a sidechain of Bitcoin that enables Bitcoin to move between the Liquid and Bitcoin networks with a two-way peg. Bitcoin that is used on the Liquid network is referred to as L-BTC. The Liquid network’s members, known as functionaries, manage and secure the equivalent amount of Bitcoin.

CTO of cryptocurrency exchange Bitfinex Paolo Ardoino stated on Twitter that “digital securities law will enable El Salvador to be the financial center of central and south America.”

It is anticipated that Bitfinex will soon receive a license to list the bond issuance in El Salvador as well as offer brokerage services for each trade.

Bond investors will have the chance to obtain Salvadoran citizenship through an expedited process while earning a yield of 6.5%. Once the initial $500 million has been monetized, the government will distribute half of the additional gains to investors as a Bitcoin Dividend. Blockstream’s asset management platform will distribute these dividends on an annual basis.

The first significant step for issuing these bonds has been achieved by submitting the bill, which was mentioned earlier this year by Mow.

The bill must now be approved by Congress in order for an offering document to be publicized in order to finally make the bonds available.

The full bill may be found here.

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