‘Volcano Bonds’ One Step Closer in El Salvador After Passing of Law

El Salvador’s Legislative Assembly passed a bill that regulates the issuance of digital assets other than bitcoin on Wednesday. A legal framework that permits the issuance of a Bitcoin-backed bond, also known as the Volcano Bond, was incorporated into the legislation.

Nayib Bukele, the president of El Salvador, stated in September of 2021 that the Central American government had made bitcoin legal tender earlier that year, and intended to spend $1 billion using bitcoin-backed bonds. The proposed document quickly gained notoriety as the Volcano Bonds because the funds were intended to be used to create a bitcoin mining sector and ‘Bitcoin City‘ that was entirely powered by renewable energy, including the energy provided by active volcanoes.

The bond issuance was originally scheduled for March 2022, however, it was postponed numerous times, primarily due to the devastating bitcoin market of 2022. The digital assets legislation was ultimately submitted to the Legislative Assembly, where Bukele’s party, Nuevas Ideas, has a significant majority, at the conclusion of November 2022. Today, 62 representatives supported the legislation, while 16 opposed it.