El Salvador is one step closer to raising $1 billion through the first sovereign blockchain bond in the world after the presidency forwarded a digital securities bill to lawmakers.
The 33-page bill, which calls for a Bitcoin Fund Management Agency to oversee cryptocurrency-related debt sales and a commission on digital assets, was made public by a presidential spokesperson late on Tuesday.
The intent, according to the text, is to “create a legal framework for the transfer of digital assets used in El Salvador’s public issuances, as well as regulate the requirements and obligations of issuers and providers of digital assets.”
El Salvador announced the Bonds a year ago
The innovative project, which was first introduced today, aims to draw capital and investors to El Salvador. At that time, plans to issue $1 billion in bonds on the federated Liquid Network sidechain for Bitcoin were made public.
Proceeds from the bonds would be partitioned between a $500 million direct allocation to bitcoin and an investment of the same sum in the development of the area’s energy and bitcoin mining infrastructure.
A sidechain is a separate blockchain that operates in tandem with another blockchain and enables the secure use of tokens from the main blockchain while adhering to a different set of guidelines, performance standards, and security measures.
The tax-free, coastal Bitcoin City would be built with the help of the $100 minimum investment in the proposed blockchain bonds, which would also provide geothermal energy from a nearby volcano for cryptocurrency mining.
Bondholders would ultimately receive a share of any increase in the value of Bitcoin. Last year, El Salvador became the first nation to recognize bitcoin as a legal tender. President Nayib Bukele, a supporter of cryptocurrencies, has been unsuccessful in his attempts to sell bonds backed by bitcoin to foreign investors.
Bitfinex will soon be granted a license that will allow it to handle and list the bond issuance in El Salvador. The bonds, which have a 6.5% yield, will allow investors to quickly become citizens.
While negotiations with the International Monetary Fund on financing to help close a budget gap are at a standstill, the contentious initiative is fueling concerns about the country’s creditworthiness.