El Salvador Approves Bitcoin Bond by Passing Bill

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El Salvador has passed a bill that will allow the country to sell Bitcoin-backed bonds, according to a January 11 Bloomberg report.

The country’s Congress approved the bill with 62 votes in favor and 16 votes against. President Nayib Bukele must now sign the bill.

The bonds offered are part of a larger cryptocurrency strategy. El Salvador will invest $500 million of the proceeds from these bonds in Bukele’s proposed plan to build a “Bitcoin City” near a coastal volcano called Conchagua. The city will harness clean volcanic energy to mine cryptocurrency and use Bitcoin as the primary currency.

The country will spend the remaining $500 million to buy more Bitcoin on top of the 2,381 BTC ($42 million) it has already purchased. In fact, the country has committed to buying 1 BTC per day. Bondholders would benefit if the value of Bitcoin increases.

The El Salvador Bitcoin Bond has been a work in progress for some time now. Under Bukele’s leadership, El Salvador declared Bitcoin legal tender in 2021, and plans for the bond were first announced in November of that year.

Although the bond was due to be introduced in early 2022, market conditions delayed progress and the bond was due to be introduced in September 2022. However, the bond was again delayed that month due to issues of security, according to the declarations of the partner of El Salvador. Bitfinex.

Furthermore, it does not appear that El Salvador had any potential bond buyers until recently. In February 2022, reports indicated that the county had attracted $500 million in verbal engagements with the possibility of earning another $5 billion.

Despite passing the needed bill today, it’s unclear when the country could start issuing and selling bonds to buyers.

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