El Salvador: Are Bitcoin Bonds Coming Now?

It has been almost exactly a year since BTC-ECHO first reported on the ceremoniously announced Bitcoin Bonds in El Salvador. At that time, a team from BTC-ECHO was in the country and saw the BTC experiment with their own eyes. You can read their view of things in magazine issue number 54. Since then, it has become relatively quiet about the orange capital injection, which should bring the country into shape and finance the construction of the Bitcoin City mega-project.

But now there are updates. Economy Minister Maria Brevé has submitted a bill to the country’s National Congress outlining the broad outlines of bitcoin bonds. That “Ley de Emisión de Activos Digitales” (Digital Asset Issuance Act) aims to pave the way for bringing the $1 billion bond issue to the investor. The preamble to the law states:

[…] The Digital Asset Issuance Act […] aims to establish a legal framework for the transfer of digital assets in order to promote the efficient development of the digital asset market and protect the interests of buyers.

Government agency to hold bonds

Among other things, the 33-page document provides for the establishment of a trust for the administration of the BTC that will be collected through the securities issue. The so-called “Agencia Administradora de Fondos Bitcoin” is therefore a “public-law institution” that reports to the Ministry of Economic Affairs.

Setting up your own institution to hold the coins is important. Finally, President Nayib Bukele, himself a big Bitcoin advocate, has managed government investments in Orange Coin himself.

At times, the charismatic head of state, who was elected the youngest president in the country’s history at just 37, boasted about bitcoin trading on his smartphone. And that too naked.

In the wake of the FTX disaster, rumors circulated that El Salvador had stored its coins at the failed exchange and was now bankrupt. So far, however, these have not been confirmed.

New billions for the country

The Bitcoin Bonds, which could soon become a reality with the new legal framework, are expected to bring a billion US dollars to the Central American country. Half of the money will be used by Bukele to buy Bitcoin and the other half to promote Bitcoin-related infrastructure projects such as Bitcoin City or “volcano mining” in the country.

Meanwhile, the bonds are to be launched on the Liquid sidechain. This is a second-layer solution on Bitcoin that is linked to the BTC network. The bond has an interest rate of 6.5 percent; the proceeds come from the returns on bitcoin investments. Now the country’s National Assembly still has to approve the bill – But that should happen before Christmas.