The Legislative Assembly of El Salvador approved the Digital Assets Issuance Law, a framework that will allow the country to issue crypto-related debt instruments. The approved law, which was passed thanks to the majority that President Nayib Bukele has in Congress, serves as a base for the issuance of the long-expected volcano bonds.
El Salvador Passes Digital Bond Law
El Salvador has taken another step in the way of integrating blockchain technology with the financial operations of the state. The Legislative Assembly finally passed the Digital Assets Issuance Law, which establishes the rules for the state to open cryptocurrency-related public offers.
The law, which was passed with a majority due to the support of Nayib Bukele’s party, has the objective “to establish the legal framework that grants legal certainty to transfer operations to any title of digital assets that are used in the issuance of public offerings carried out in El Salvador.”
The document also creates the bitcoin funds managing agency, an autonomous institution that will manage the funds the state will obtain with the issuance of cryptocurrency-based bonds, and will have a direct relationship with the Treasury of El Salvador.
Implications and Further Developments
The approval of this law, which was introduced in November, comes to serve as a base for the issuance of the long-announced volcano bonds, a set of debt instruments that will partially be used to fund the construction of the country’s Bitcoin City . The city, which would be tax-free and carbon-neutral, would be built with $1 billion coming from these bonds, and powered by geothermal energy.
The volcano bonds were projected to be issued by El Salvador last year, but the government repeatedly delayed issuance due to the conditions of the cryptocurrency market and the rise of the Ukraine-Russia conflict, according to statements made by Alejandro Zelaya, the Treasury Minister of the country.
However, not all deputies supported this law, as some expressed their dissatisfaction with the way in which it passed. Johnny Wright, part of the opposition coalition, stated :
El Salvador is creating ideal conditions for money laundering, an ecosystem that facilitates money laundering and tax evasion.
Furthermore, deputy Claudia Ortiz criticizes that this law opens the door for Bukele’s government to issue bonds without any control. Even so, there is still no date set for the issuance of the volcano bonds.
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