In another exciting announcement from “Bitcoin Country”, El Salvador has announced the passing of its “Digital Asset Issuance” legislation that was proposed last November. This new digital asset regulatory framework paves the way for its much anticipated Volcano Token issuance.
A Regulatory Framework For Digital Assets
In more historic news from El Salvador, the small Central American nation that surprised the world by being the first country to adopt Bitcoin as legal tender in September of 2021, comes another breakthrough announcement with the passing of its “Digital Asset Issuance” securities law.
This new law establishes a legal framework around the issuance of digital assets and the broader crypto token classification, which includes every other type of digital asset in the crypto market besides Bitcoin. This means that there is now a definitive regulatory framework for tokenised securities, altcoins, and businesses that wish to transact or offer services focused on digital assets other than Bitcoin.
The new digital asset regulatory framework would also establish a Bitcoin Fund Management Agency, which provides oversight and administration for public offerings of digital assets issued by the state of El Salvador and its institutions.
Paving The Way For The Volcano Token
The 33-page digital securities bill was originally proposed in November of 2022 and is expected to lay the legal groundwork to allow the nation to move forward with its so-called “Volcano Bond”. The Volcano Bond, which is more accurately described as Volcano Token, is a digital token which would help El Salvador to raise capital to pay down its sovereign debt, direct funds towards the creation of Bitcoin mining infrastructure, and fund the construction of “Bitcoin City”.
El Salvador’s Volcano Token is targeted to raise $1 Billion and would be backed by the proceeds generated from its geothermal Bitcoin mining operation, which harnesses energy from the nation’s active volcanoes. By leveraging the nation’s natural resources and geothermal energy, El Salvador’s Bitcoin mining industry would utilise only renewable energy to create new Bitcoin, making investment in the bond very attractive to both traditional and ESG investors.
Bitcoin City is a planned special economic zone which was announced by Salvadoran President Nayib Bukele in November of 2021, which will be built on the Gulf of Fonseca on the southern coast of El Salvador, near El Salvador’s Conchagua volcano. Bitcoin City would offer tax advantages, friendly regulations, create mining infrastructure, and incentivise Bitcoin businesses and entrepreneurs to open offices and startups within the nation.
A New Financial Centre For Hyperbitcoinisation
With the passage of the digital asset issuance legislation, El Salvador is actively positioning itself to realise its vision to become a leading financial centre for the global Bitcoin economy, similar to the current roles played by nations like Switzerland, Luxembourg, Singapore, London and New York for legacy finance.
The digital asset issuance law comes on the heels of the formation of El Salvador’s newly created National Bitcoin Office (ONBTC), which was formed in November of 2022 to oversee the nation’s domestic Bitcoin projects. The ONBTC is an official government office which will oversee and carry out the country’s planned Bitcoin projects and collaborate with other nations internationally to develop and advise on Bitcoin policy.
Despite the bear market and Bitcoin’s price decline from $69,000 to its current price at the time of writing of $17,383, President Bukele has shown unwavering commitment to El Salvador’s Bitcoin strategy by announcing that El Salvador would be purchasing 1 Bitcoin per day, for an undetermined amount of time.
Detractors have pointed out that El Salvador is currently underwater on its purchase of more than 2,300 Bitcoin held on the nation’s balance sheet, but El Salvador hasn’t sold any Bitcoin yet, so they haven’t lost anything except for on paper. In a year’s time, as the next halving approaches in 2024, President Bukele may emerge as a very shrewd statesman as the Bitcoin price may begin to recover.
With Bitcoin’s long-term performance as an investment asset, his detractors may have to do an about-face if his strategy is successful. Bitfinex will be a technology provider for the nation’s Volcano Token, which is expected to move forward now that the new regulatory framework is in place. We are watching this development with excitement, along with the rest of the Bitcoin community.