The world’s first sovereign bond backed by Bitcoin, also known as the Volcano Bonds, reportedly received regulatory approval from El Salvador’s Digital Assets Commission, as per an X post by the National Bitcoin Office (ONBTC).
The Bitcoin and blockchain policy and education group backed by the El Salvadorian government expects the bond to be issued during the first quarter of 2024.
“This is just the beginning for new capital markets on Bitcoin in El Salvador,” declared the ONBTC.
El Salvador Sets the Path For Issuance of the First-ever Bitcoin-backed Sovereign Bond
The Bitcoin Office said the Volcano Bond will be issued on Bitfinex Securities, a trading platform for blockchain-based equities and bonds that is registered in El Salvador. The bond set to last 10 years is expected to pay 6.5% in annual return to holders.
The idea of a Bitcoin bond was first touted by Bukele in November 2021 shortly after he passed legislation recognizing the world’s most valuable cryptocurrency as legal tender in El Salvador.
The bond’s issuance was initially planned for March 2022 but had to be postponed several times. However, things started to become positive for the Volcano Bond after the Digital Assets bill was introduced in the Legislative Assembly at the tail end of November 2022.
The historic legislation providing the legal framework for issuing the Bitcoin-backed bond was passed in the parliament in January 2023, where Nayib Bukele’s Nuevas Ideas (New Ideas) party has a large majority.
Volcano Bonds Will Be Used to Pay Off Sovereign Debt and Fund Bitcoin City
Bukele targets to raise $1 billion through the Volcano Bonds, which will be used to pay down El Salvador’s sovereign debt and fund the construction of the ‘Bitcoin City’ – an ambitious Bitcoin mining facility solely run on renewable energy, including geothermal that is generated by the country’s active volcanoes.
Stablecoin issuer Tether is among the companies investing in the so-called Volcano Energy project that plans to generate electricity from renewable sources to power future Bitcoin mining operations in the Latin American nation.
In October, Volcano Energy launched its first local Bitcoin mining pool called the Lava Pool in partnership with American Bitcoin mining giant Luxor Technologies.
The first phase of the project will see the construction of a 241-megawatt (MW) mining facility that will comprise 169 MWs of photovoltaic solar energy and 72 MWs of wind power.
The mining farm is being built in El Salvador’s Metapan region, which is close to the Conchagua volcano that is said to power the country’s Bitcoin mining operations.
El Salvador Plans to Offer Residency to Investors Holding $1 Million in Bitcoin
The Volcano Bonds receiving regulatory approval is the second major Bitcoin-focused development this month. Last week, El Salvador kickstarted its “Freedom Visa” program that will offer residency to a maximum of 1,000 persons per year who hold at least $1 million worth of Bitcoin (BTC) or Tether USD (USDT).
The concept similar to the ‘Golden Visa’ offered by Switzerland and the United Arab Emirates, gives eligible participants a long-term residency permit and a path to full citizenship in the country. The application costs a non-refundable $999 in BTC or USDT.
El Salvador, which created history in September 2021 after becoming the first country to recognize Bitcoin as a legal tender, holds over 2,700 BTC in its national treasury – a position that yielded over $3 million in unrealized profit so far.