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El Salvador’s government has presented a bill to congress for regulating cryptocurrencies and related assets beyond just Bitcoin.
The legislation brings the Central American country a step closer to its goal of issuing blockchain-based Bitcoin-bonds.
The Digital Securities Law
The “Digital Asset Issuance Law” was presented by a spokesperson for the Salvadoran presidency late Tuesday. The legislation seeks to establish a dedicated crypto commission and Bitcoin Fund Management Agency for overseeing crypto debt sales.
Tether CTO Paolo Ardoino said on Twitter that the bill would make El Salvador “ the financial center of central and south America.”
Its legislation’s text says it will “create a legal framework to transfer digital assets that are used in public issuances in El Salvador, as well as regulate the requirements and obligations of issuers and providers of digital assets.” El Salvador President Nayib Bukele announced plans for Bitcoin-backed bonds in January, but has delayed the offering multiple times.
The planned $1 billion raise from the bond will fund a $500 million investment into Bitcoin, with the other half going towards building Bitcoin City infrastructure. Bitcoin City should be a tax-free coastal city, obtaining funds through Bitcoin mining. This will be possible via harnessing geothermal energy from local volcanoes.
With a minimum investment of $100, the bonds promise holders an annual return of 6.5%. Bondholders will also share in the appreciation of Bitcoin purchased by El Salvador as part of its raise.
The bonds will be issued on the liquid network – a federated Bitcoin sidechain. The sidechain used a 1:1 pegged version of Bitcoin, but offers various features not available on the regular Bitcoin network. These include token issuance, increased privacy, security, and scalability.
Firm Commitment to Bitcoin
El Salvador became the first nation to adopt Bitcoin as a legal tender in 2021. However, the asset’s price has fallen by well over 60% since that time.
The bear market has sparked major criticism of President Bukele’s Bitcoin strategy, and his nation’s creditworthiness. International agencies including the International Monetary Fund (IMF) have called on the country to remove Bitcoin as legal tender to mitigate risk.
Ethereum co-founder Vitalik Buterin also reiterated criticism of Bukele’s “top-down enforced” adoption style on Monday.
Nevertheless, Bukele remains firmly committed to investing in Bitcoin, promising to purchase 1 BTC per day starting last week.