El Salvador is apparently readying a new Bitcoin law.
Samson Mow, Chief Strategy Officer of Blockstream — the crypto asset firm overseeing El Salvador’s forthcoming, billion-dollar Bitcoin bond issuance — announced it in an English-language tweet on Jan. 3, according to El Salvador.com.
The new Digital Securities Law Mow referred to likely has something to do with the Volcano Bond project, but no details were forthcoming.
The announcement by Mow did ruffle a few feathers, with the El Salvador article noting that “he did not explain the reason why it is he who publishes that information first-hand and not the Salvadoran Executive.”
It also pointedly noted that Blockstream would work with the cryptocurrency exchange Bitfinex, sister company to stablecoin issuer Tether — pointing out that iFinex, the owner of the two companies, paid an $18.5 million fine last year to settle charges brought by New York’s Attorney General. Those came after it was discovered that Tether secretly loaned Bitfinex hundreds of millions of dollars to keep it afloat after the exchange lost $850 million, allegedly to theft.
As for Mow’s announcement, the only news on the subject from official channels, the article said, came from a Presidential tweet announcing that he plans to propose at least 20 laws having to do with “innovation and financial freedom.”
In an interview the next day, El Salvador’s Minister of Finance Alejandro Zelaya said that package of laws was needed for the Bitcoin bond, as “a series of regulations must be issued” to create a legal framework for it. “We do not have a law for the issuance of securities in crypto assets, nor an authority that verifies operations in the securities market,” he said.
They’ll be creating one mighty quickly, as the administration has said the bond issuance would be in February or March.
The $1 billion bitcoin bonds were nicknamed “Volcano Bonds” because they were pitched as a way to fund Bukele’s Bitcoin City project, which begins with a cryptocurrency mining operation that would rely on geothermal power from the Conchagua volcano.
Half of the issue would go to setting up the server farm infrastructure and buying the bitcoin mining computers, and the remaining $500 million would go to buying more bitcoins.
If that bond issuance is successful, a similar one could be used to pay off the $800 million Eurobond issue maturing in 2023, Zelaya said.
Salvadorean President Nayib Bukele predicted that the volcano bond offer would be oversubscribed, although there are some questions about that. For one thing, the dollar-denominated, Bitcoin-paid bonds offer a 6.5% a year interest payment — which is far below the interest offered by the country’s normal bonds — which collapsed in price in 2021, ending the year at 62 cents on the dollar.
Zelaya also suggested El Salvador could become “a Central American debt market center promoted by the Central American Bank for Economic Integration,” or CABEI.
One of those laws in that package, it seems, will create a path to citizenship for Bitcoiners who wish to settle in El Salvador, Zelaya said.
“There are bitcoiners and friends of mine, who want Salvadoran nationality and ask me how they can do to obtain it, but the country’s legislation does not have those benefits,” he said.
Zelaya suggested it would be similar to laws in the U.S. and elsewhere that grant a variety of residence or even citizenship benefits.
More broadly, Bukele used the New Year Day holiday to make several crypto-related predictions, notably that Bitcoin will reach $100,000 in 2022, that two more countries will adopt Bitcoin as legal tender.