El Salvador's long-awaited Bitcoin bonds, popularly known as "Volcano Bonds," have gotten regulatory approval, opening the path for their introduction in early 2024. El Salvador's Digital Assets Commission awarded the license in December, marking a key step forward in the country's drive to embrace digital assets as a means of paying down sovereign debt and funding the projected "Bitcoin City."
El Salvador's Digital Assets Commission has given the go-ahead for the issuing of the much-anticipated Bitcoin bonds. These bonds, which are intended to leverage the potential of digital assets, were approved by regulators in December. In a statement, the National Bitcoin Office (ONBTC) confirmed the news.
Source: X (ex. Twitter)
Volcano Bonds will be available to investors and cryptocurrency enthusiasts in the first quarter of 2024. Nayib Bukele, El Salvador's pro-Bitcoin leader, also hinted at this development in a social media post in which he enigmatically queried, "Wen volcano bond?" This was followed by reposts and discussions of the bonds' expected issuance in the first quarter of 2024.
El Salvador's path to releasing Volcano Bonds began in November 2021, when the potential of issuing such bonds first surfaced. On January 11, 2022, El Salvador passed breakthrough legislation that established the legal foundation for Bitcoin-backed bonds. These bonds serve two functions: they reduce sovereign debt and they fund the ambitious project known as "Bitcoin City."
El Salvador would partner with Bitfinex Securities
The Volcano Bonds will be listed on the Bitfinex Securities Platform, an El Salvador-based registered trading platform for blockchain-based equities and bonds. This action heralds the establishment of Bitcoin-based capital markets in the country, indicating the increasing acceptability and integration of cryptocurrencies into the financial sector.
Volcano Bonds investors should expect a decade-long commitment, as these bonds have a ten-year maturity duration. Furthermore, they will provide their holders with a competitive annual return of 6.5%. This appealing return rate may pique the curiosity of domestic and foreign investors looking to diversify their portfolios.
El Salvador has recently launched on a $1 billion Bitcoin mining operation with a capacity of 241 megawatts. Through a strategic relationship with Luxor Technology, this ambitious venture leverages the country's vast volcanic resources. El Salvador's dedication to leverage its unique geographical advantages for cryptocurrency mining will be demonstrated by the mining activities, which will be predominantly powered by the Conchagua volcano.
The Volcano Bonds have been approved nearly 21 months after the country's former finance minister, Alejandro Zelaya, declared the launch date as mid-March 2022. The delay in the issue of these bonds demonstrates El Salvador's painstaking effort to ensure regulatory compliance and a secure investment environment for all stakeholders.