El Salvador’s parliament is preparing to vote on a draft bill for cryptocurrency regulation. If passed, President Bukele’s government will seek to raise $1 billion for the world’s first Bitcoin-backed bond.
El Salvador’s Legislative Assembly is set to vote on a digital assets regulation bill that seeks to broaden the country’s existing framework to include all cryptocurrencies. If the bill is passed, the government will go ahead with President Nayib Bukele’s plan to issue Bitcoin-backed bonds.
The bill that was presented to the national assembly by Minister of Economy Maria Luisa Hayerm Breve points to the creation of a National Digital Assets Commission. The government body would oversee the regulation of “digital asset issuers, service providers, and other participants involved in the public offering process of digital securities”. The Bukele government is also seeking to raise $1 billion to launch the world’s first sovereign bond backed by Bitcoin (BTC), a controversial move criticized by the International Monetary Fund and the World Bank.
In September 2021, El Salvador became the first country in the world to adopt Bitcoin as a legal tender. The country’s pro-crypto leader purchased 2,301 BTC for roughly $103.9 million at the time. In November, President Bukele said the country was working with digital assets firm Blockstream to develop the Bitcoin “Volcano” Bonds. Of the $1 billion that will be raised for its development, $500 million will be used to construct a “Bitcoin City” near the Conchagua volcano, while the other half will be used to purchase more Bitcoin to back the bonds. El Salvador’s ‘Bitcoin City’ is currently seeking investments from crypto investors and companies. The Volcano Bonds which was supposed to be launched in early 2022, was delayed due to a lack of regulatory clarity and bear market conditions.
El Salvador last bought Bitcoin in July, when the government acquired 80 BTC for $19,000 each. Last week, President Bukele said that his government would purchase one Bitcoin every day.
In October, El Salvador signed a Memorandum of Understanding (MOU) with Lugano – the crypto hub of Europe that adopted Bitcoin (BTC) and Tether (USDT) as legal tender in April – to cooperate on enhancing economic relations, education and research and help also support cryptocurrency adoption in Europe by spreading awareness on blockchain technology and digital assets. El Salvador will open a Bitcoin office in the Swiss city.
Earlier this year, the government released an official Bitcoin wallet called ‘Chivo’ to enable BTC payments across the Central American nation. With over 4 million active users, Chivo has processed BTC transactions worth $52 million in the first two quarters of 2022. In October, British crypto exchange CoinCorner launched the ‘Bolt Card’ in the country, allowing residents to make retail payments in BTC. The ‘tap-to-pay’ crypto debit cards utilize Bitcoin Lightning Network (LN) to process transactions instantaneously. LN is a layer-2 scaling solution for Bitcoin that helps the blockchain conduct faster and cheaper transactions.
The parliament must vote with a majority to pass the digital asset regulation bill for the Bukele government to issue its highly anticipated Bitcoin bonds. The ruling Nuevas Ideas (New Ideas) party has a majority in the legislature.
At the time of writing, BTC is trading at $16,549, only slightly up in the last 24 hours. The world’s largest cryptocurrency by market cap is still over 90% down from the all-time high of $69,000 it reached in September 2021.
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