El Salvador Passes Landmark Law for Digital Assets, Launching Volcano Bonds

• El Salvador has passed a landmark law to establish a legal framework for digital assets, paving the way for the issuance of “Volcano Bonds” proposed by President Nayib Bukele.
• The law was proposed in November 2022 and voted in favor of in January 2023.
• A National Digital Assets Commission will be set up to oversee the issuance of digital assets and the development of a “Bitcoin City” powered by the Colchagua volcano.

The Legislative Assembly of El Salvador has passed a monumental law that will create a legal framework for digital assets, paving the way for President Nayib Bukele’s proposed “Volcano Bonds”. The law was proposed in November 2022, and was voted in favor of on January 11, 2023, with 62 votes in favor.

The passing of this key legislation brings El Salvador one step closer to issuing Bitcoin-backed bonds to fund the construction of a “Bitcoin City”. This city is planned to be built at the base of the Colchagua volcano, and will be powered by the volcano’s hydrothermal energy. This is where the bonds receive their name from. President Bukele’s administration initially proposed these bonds in 2021, with a plan to issue $1 billion worth of the bonds.

The law creates a legal framework for the issuance of digital securities, and also establishes a National Digital Assets Commission which will oversee the issuance of digital assets and the development of a “Bitcoin City”. The commission will be composed of representatives from the Central Bank, the Attorney General’s Office, the Ministry of Economy, the Ministry of Finance, and the National Bitcoin Office.

The law also requires that the bonds be backed by a “fiat” currency, which will act as a guarantee that the bonds are secure. The National Bitcoin Office of El Salvador is also developing a process to ensure the security of the bonds, including a system for the collection and transfer of funds. The law is also meant to establish a framework for the taxation of digital assets.

The issuance of the bonds was initially planned for March 2022, but was delayed due to the crypto winter. The passing of this law is a major step forward for El Salvador, and is a testament to the nation’s commitment to innovation and technology. The law is expected to open up new opportunities in the digital asset space, and will undoubtedly have a lasting impact on the nation’s economy.

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