El Salvador’s Legislative Assembly has approved a digital asset issuance law, a framework that will allow the country to issue crypto-related debt instruments. The approved law, passed thanks to the majority President Nayib Bukele has in Congress, will serve as the basis for the long-anticipated issuance of volcanic bonds.
El Salvador Passes Digital Bond Law
El Salvador has taken another step forward in the way it integrates blockchain technology into the nation’s financial operations. The Legislative Assembly finally passed the Digital Asset Issuance Law, which sets rules for the state to conduct cryptocurrency-related public offerings.
The law, passed by a majority with the support of the political party of Nayib Bukele, has the objective of “establishing a legal framework that grants legal certainty to any transfer operation to any title of digital assets used to issue public offerings conducted in El Salvador.”
The document also creates the Bitcoin Funds Management Agency, an autonomous body that will manage the funds acquired by the State in the issuance of cryptocurrency-based bonds and will have a direct relationship with the Ministry of Finance of El Salvador.
Implications and Further Developments
The approval of this law, introduced in November, has come to serve as the basis for the issuance of the long-announced Volcano Bonds, a series of debt documents that will be used in part to build the country’s Bitcoin City. The tax-exempt, carbon-neutral city will be built with $1 billion from the bonds and will be powered by geothermal energy.
The volcano bond was expected to be issued by El Salvador last year, but the government has repeatedly postponed the issue due to the state of the cryptocurrency market and the outbreak of the Ukrainian-Russian conflict, according to statements by the country’s Finance Minister Alejandro Zelaya.
However, not all lawmakers support the law, as some have expressed dissatisfaction with the way it was passed. Johnny Wright, part of the opposition coalition, said,:
El Salvador creates ideal conditions for money laundering, an ecosystem that facilitates money laundering and tax evasion.
In addition, deputy Claudia Ortiz criticized the law as paving the way for the Buquere administration to issue bonds without any control. Nevertheless, a date for the issuance of the Volcano bonds has not yet been set.
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