El Salvador’s congress approved a digital securities law that would allow the nation to raise funds through the world’s first sovereign blockchain bond.
In a majority vote, Congress approved the bill by 62 votes to 16. Despite initially being planned for March 2022, the bond issuance had to be postponed primarily due to last year's brutal bitcoin bear market.
The plan has been criticized by credit ratings agencies and the International Monetary Fund, however, the proposed bill creates a legal framework that would underpin President Bukele’s plans to sell Bitcoin-backed bonds.
The securities are intended to raise $500 million to help build a tax-free, coastal town known as Bitcoin City, that would have geothermal energy from a nearby volcano for mining digital coins.
Another $500 million would be earmarked for buying Bitcoin, with any appreciation in the digital currency ultimately shared with bondholders, according to the government’s proposal.
In a statement released Wednesday 11 January 2023, crypto exchange, Bitfinex stated it:
“will be an infrastructure provider for what it says should really be termed the "Volcano Token", "a digital token which would help El Salvador to raise capital to pay down its sovereign debt, direct funds towards the creation of Bitcoin mining infrastructure, and fund the construction of 'Bitcoin City'."
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