El Salvador, the first country to make Bitcoin legal tender (in September 2021), has passed legislation allowing the country to issue sovereign Bitcoin-backed bonds. 

According to a report by Bloomberg, El Salvador’s congress has approved a new digital securities law that would allow for raising funds via the “world’s first sovereign blockchain bond.” The bill, approved by 62 votes to 16, is part of President Nayib Bukele’s plan to sell Bitcoin-backed bonds.

This was President Bukele’s reaction:

Bitfinex and Tether CTO Paolo Ardoino had this to say to his over 192K Twitter followers:

Today El Salvador 🇸🇻 establishes a legal framework for all digital assets (apart #Bitcoin that is legal tender)… MSM always claimed that the digital asset law would never pass, once again understanding little to nothing about the commitment of ES to #bitcoin… I can see already their articles starting tomorrow with “but but but but but but …”… Anyway, this is a great victory… El Salvador is on an amazing trajectory, providing to its citizens their best tools for freedom.

The new sovereign Bitcoin bond is planned to raise $500 million to help build a new tax-free coastal city dubbed Bitcoin City. The development will reportedly use geothermal energy from a nearby volcano to mine BTC and other cryptoassets. 

As part of the bill, an additional $500 million raised will be set aside for the purchase of Bitcoin, with the cryptoasset’s appreciation passed along to bond holders.

The report claims the bill, which must still be signed into law by President Bukele, has been criticized by credit ratings agencies, in addition to the International Monetary Fund (IMF). As a result, El Salvador’s bonds have been trading at a “steep discount” due to concern from investors over the risk of default. 

The Bloomberg report also mentioned the government initially intended to sell the Bitcoin bonds in the first quarter of 2021, but has postponed the issuance multiple times due to BTC’s price decline. 

According to a report by Decrypt, this bill “separates cryptocurrencies from all other assets and financial products, including central bank digital currencies”s (CBDCs) and it also “separates Bitcoin from the rest of the crypto market, identifying them as digital securities.”

Image Credit

Featured Image via Pixabay