El Salvador Prepares Regulatory Framework To Issue Controversial Bitcoin Bonds

Will the plan work? Soon, the Bitcoin Bonds will get the legal foundation they need. In a recent TV interview Alejandro Zelaya, El Salvador’s Finance Minister, said they will send the necessary bills to Congress. Soon. Reportedly, El Salvador will initially issue $1B worth of bonds, which will have a ten-year maturity and carry a 6.5% coupon. The bitcoin that backs them will be locked for five years.

The project, announced by President Bukele at Labitconf 2021, includes plans to build Bitcoin City. More on that later. In a scheme worthy of MicroStrategy, El Salvador will spend half of the money on the construction of Bitcoin City and will buy Bitcoin with the other half. Will the plan work? Well, they have to sell the bonds first. And for those to exist, a regulatory framework is required.

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What Did El Salvador’s Finance Minister Say About The Bitcoin Bonds?

In an interview in the local TV show “Frente a Frente,” Zelaya announced the plan’s following steps. Reuters reports:

“El Salvador’s government will send to Congress about twenty bills covering financial markets and investment in securities to provide a legal foundation for issuing bitcoin bonds, Finance Minister Alejandro Zelaya said on Tuesday.”

The Finance Minister didn’t specify exactly when they will introduce the bills. But the will is there. According to El Salvador In English, Zelaya said, “This type of legislation is what we are going to send to the Legislative Assembly to be able to give legal scaffolding and legal certainty to all those who buy the Bitcoin bond.”

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Through the Ministry of Finance’s Twitter, they quote Zelaya being even more daring. “El Salvador could become a regional center where other countries can issue debt, we have great advantages such as having a dollarized economy and pioneers regarding crypto.”

Adding fuel to the fire, President Bukele said via Twitter, “It’s to cover and guarantee the Bitcoin Volcano Bonds, but also a full re-engineering of the economy and of the way a nation state does business.” Not satisfied with that bomb, he added, “Everybody searching for freedom: this is the place to come.”

What About Bitcoin City? Is That A Go?

The Bitcoin Bonds will finance the construction of Bitcoin City, but, what’s that exactly? When President Bukele announced El Salvador’s plans, NewsBTC timely reported: 

“According to Bukele, Bitcoin City will be a full-fledged metropolis with residential and commercial areas. It would also have shopping centers, restaurants, a port, an airport, and railway services. There would be no income, property, capital gains, or payroll taxes. Residents would, however, be subject to just value-added tax (VAT). This tax will go towards paying for the municipality’s bonds, public infrastructure, and city maintenance.”

However, more recently, an investigative report by podcaster Anita Posch cast doubt upon the Bitcoin Bonds and the whole enterprise:

“Apparently, the seemingly advanced plan for Bitcoin City was a collage. “At least some of the Bitcoin City presentation slides were downloaded from the internet and there was no detailed plan behind the announcement.” Not only that, the structure behind the Bitcoin bonds that will finance the whole operation was also improvised. “The way the Bitcoin bonds will work was finally decided only a few minutes before Samson Mow took the stage.”

However, the plan is a go, and Blockstream’s Samson Mow is all-in on it. He recently tweeted the trailer for an upcoming documentary on El Salvador and its Bitcoin City plans. In the tweet, he threw an extremely optimistic, “Bitcoin is going to save the world and it starts here in El Salvador.”

Will the plan work? Is Bitcoin City a real project or a hastily put together mess? Do the Bitcoin Bonds offer a high enough return? Or are the Bitcoin Bonds too risky? Wouldn’t it be better for an investor just to buy bitcoin with that bonds money? Or are we missing something? 

To answer all those questions and more, El Salvador needs a regulatory framework to issue the Bitcoin Bonds. And the roughly twenty bills that guarantee that are on their way to Congress.

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El Salvador’s Legislative Assembly Green Lights The $150 Million Bitcoin Trust

The Legislative Assembly of El Salvador has issued legislation on the approval of a $150 million Bitcoin Trust. In addition, they passed legislation supporting crypto services and infrastructure development across the entire country.

They passed the bill on August 31, and 64 officials voted in support, while 14 opposed the creation of the Bitcoin Trust. The Trust aims to enhance BTC to U.S. Dollars conversion and support the essential technological infrastructure. This will enable the widespread adoption of digital assets.

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The government of El Salvador has mapped out $23.3 million for establishing crypto ATMs. They have also set aside $30 million for incentivizing the use of Chivo, the state-backed wallet.

Bitcoin To Be Used As Legal Tender

The news came just a week preceding the set implementation time for the controversial Bitcoin law of the country. The legislation will recognize BTC as legal tender across the Country by Sept. 7. The country currently uses U.S. dollars as legal tender. Bandesal, the Development Bank of  El Salvador’s was appointed to manage the Bitcoin Trust operation.

El Salvador plans to redirect the $150 million from their $500 million loans with (CABEI)Central American Bank for Economic Integration. They took the CABEI loan for economic recovery for medium and small-scale businesses.

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In addition, the government will channel $23.3 million of the funds to support the establishment of government-approved crypto ATMs. This will allow the residents to exchange Bitcoin for USD and verse versa.

Moreso, $30 million was also mapped out for incentivizing the citizens to continue adopting Chivo, the Government’s digital wallet.

Statement From The President

President Nayib Bukele announced that the government would airdrop $30  Bitcoin to all Salvadoran adults who download Chivo wallet. He added that the country’s population is 6.5 million, which is high enough.

This suggests two things; the first is that the government thinks Bitcoin adoption will be less. The second option is that they are yet to allocate enough Bitcoin that will go round.

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Today in related news, Koibanx announced that it signed an agreement with the El Salvador government on cryptocurrency infrastructure. The deal is to develop the county’s infrastructure on digital currency with Algorand’s open-source blockchain.

Many citizens of El Salvador, including people from international organizations, have been skeptical about El Salvador’s Bitcoin Law. The law has also witnessed some critics too.

El Salvador Legislative Assembly Green Lights The $150 Million Bitcoin Trust

El Salvador Legislative Assembly Green Lights The $150 Million Bitcoin Trust

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Maria Luisa Hayém Brevé, the country’s Minister of Economy, has stated that the government focuses on crypto education. She added that they use crypto incentives to complement the high rate of uncertainty among their population.

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