- The introduction of El Salvador’s “volcano” bonds backed by bitcoin was made feasible.
- The innovative project aims to draw finance and investors to El Salvador.
- Investors will be able to obtain citizenship quickly through the bonds.
The debut of El Salvador’s bitcoin-backed “volcano” bonds was made possible. This was hedged by the submission of a law authorizing the issuing of digital assets. What’s more, this was done to the nation’s legislative assembly by Minister of the Economy Maria Luisa Hayem Brevé.
Particularly, the innovative project aims to draw finance and investors to El Salvador. Plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, were made public at the time.
Proceeds from the bonds would be split between a $500 million direct allocation to bitcoin. Additionally, is an investment of the same amount in the development of the area’s energy and bitcoin mining infrastructure. A sidechain is a separate blockchain that operates in tandem with another blockchain. It enables the secure usage of tokens from the main blockchain. It also adheres to a different set of guidelines, performance standards, and security measures.
With a two-way peg, Liquid’s sidechain for Bitcoin enables bitcoin to move between the Liquid and Bitcoin networks. L-BTC is a symbol for bitcoin that is used on the Liquid network. The network’s users, known as functionaries, administer and safeguard its verifiably comparable quantity of Bitcoin.
“Digital securities law will enable El Salvador to be the financial center of central and south America,” wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.
To conduct and list the bond issuance in El Salvador, Bitfinex will soon receive a license.
Investors will be able to obtain citizenship quickly through the bonds, which will yield 6.5%. Once the first $500 million has been monetized, the government will distribute half of the additional gains to investors as a Bitcoin Dividend. The asset management platform of Blockstream will be used to distribute these dividends on a yearly basis.
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