El Salvador’s controversial bitcoin-backed Volcan Bonds

Last week, El Salvador moved a step closer to issuing controversial bitcoin-backed “Volcano Bonds.” The country’s Legislative Assembly has adopted the legal framework for issuing blockchain-based digital securities, including provisions allowing businesses to deal in digital assets other than bitcoin.

On January 11, 62 of its members voted in favor of this new Digital Asset Issuance Law. However, El Salvador President Nayib Bukele originally planned to issue the bonds in March 2022.

The Bukele regime has delayed bond issuance several times, partly because of last year’s weak digital asset markets, but also because of more pressing issues, such as a nationwide crackdown on gangs – by September, mass arrests had imprisoned a staggering 2% of all. mature men living in the country.

As president accepts bitcoin as legal tender in 2021, struggles to prove the move makes any sense for country — El Salvador sparred with major international players In the financial industry such as the International Monetary Fund.

Bukele has found a new outlet for bitcoin shillings at the Miss Universe pageant, which will be hosted by El Salvador next year.

Indeed, there are 2,300 bitcoins in the country, and the average purchase price is significantly underwater. It was estimated that he will have Bukele in November lost 65 million dollars from buying bitcoins – 61% loss. That same month, he announced plans to buy one bitcoin a day indefinitely.

With the passage of the country’s new Digital Asset Issuance Law, El Salvador is one step closer to being ready to sell its Vulcan Bonds for bitcoin and USD, specifically Tether.

Here’s what you need to know.

Whether the Salvadorans like it or not, Volcano Bonds are coming

Bukele has a way of getting what he wants. He unilaterally amended the constitution to allow him to remain president longer than was previously legal. Military forces were deployed by Bukele to force lawmakers to accept his laws.

El Salvador there was no solid legal framework for lending with digital assets until the legislature introduces a bill in November. It passed earlier this week.

The bill adds a National Digital Assets Commission to Bukele’s previously established National Bitcoin Office to manage the regulation of private participants in the digital asset industry. It also creates a Bitcoin Fund Management Agency to manage funds raised through El Salvador’s public offerings of digital assets.

El Salvador’s regime-controlled, mostly one-sided legislature “passes” the new law.

Bukele plans to raise up to $1 billion with the Volcano Bond. He says his administration will use the proceeds to pay off sovereign debt, invest in bitcoin mining infrastructure, buy bitcoin and build “Bitcoin City.”

Read more: El Salvador may be brheke is still throwing $200 million into Bitcoin Beach

Bitcoin City: A waypoint along China’s Belt and Road

If it comes to fruition, Bitcoin City will reside in the Gulf of Fonseca on the southern coast of El Salvador. The whole project is a recycled version of the Chinese ZEDES project. The city will have a friendly regulatory and tax regime for digital asset businesses interested in doing business in El Salvador.

It was renderings for Bitcoin City careless plagiarism without attribution. They are redrawn on maps of Central City from the Fullmetal Alchemist manga series.

The Bukele administration plans to use the nearby Conchagua volcano to power bitcoin mining with geothermal energy. Proceeds from Volcanic Mining will back the new bonds, hence the name “Volcanic Bonds”.

However, geothermal experts have questioned the economic viability of the Conchagua volcano for geothermal energy production. Despite the presence of the volcano, which has every opportunity to develop electricity infrastructure, as of December 2019, El Salvador still imports a fifth of its electricity.

In addition, El Salvador has industrial electricity bitcoin is still quite expensive to mine, averaging 13-15 cents per kWh. For years, China and Kazakhstan have sold industrial electricity contracts for bitcoin production for less than 5 cents per kWh.

Bitfinex ensures that Tether is accepted as a source of funding

In Bitfinex’s statement on the Digital Asset Issuance Act, it anticipated the use of renewable geothermal energy to attract investors interested in Environmental, Social and Governance (ESG) investments. Environmentalists often criticize Bitcoin’s energy use, despite a report showing that more than half of the energy used to mine bitcoin comes from sustainable sources.

Read more: Opinion: Bitfinex is going full fascist

Controversial digital asset exchange Bitfinex will provide infrastructure services for the Volcano Bond. It refers to the bond as a “Volcano Token,” indicating that the bond is pending. exists as a digital token on the blockchain. Volcano Bonds will accept financial denominations in bitcoin, USD and – critically – Tether.

El Salvador’s Volcanic Bonds appear to be a great way to whitewash Tethers by swapping them with a government-sanctioned debt issue.

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