So, after El Salvador made bitcoin its official currency, President Nayib Bukele pushed a new law for Digital Assets Issuance to the National Legislative Assembly and it got the green light. This law is aimed at using the volcano bonds to integrate bitcoin more widely across businesses and also to help kickstart the Bitcoin City.
They’re saying that part of the funds will go towards building the Bitcoin City in El Salvador, which is supposed to be a tax-free and carbon-neutral zone.
To be honest, El-Salvador is gambling on bitcoin big time. I understand that the president is very bullish on bitcoin but the country will face a bad financial date if the price of bitcoin remains down. They will definitely gain if the price goes higher but Not sure what's their contingency plan if the price goes down?
So whatever bond or instruments they are releasing, are gambling only. Not only for El-Salvador but for the investors as well. I hope they will find some institutional buyers.
El Salvador has no more than 3,000 bitcoins on its balance sheet, and half of the coins were bought for more than $45,000. A small poor country with a small population of 6.3 million will not start the mass adoption of bitcoin. The project may be interesting, but it may be more profitable to invest in bitcoin.
The issuance of the instrument is expected to raise $1 billion. According to Bitfinex, the funds raised through the Volcano Bond will be used to repay the country's sovereign debt, create infrastructure for mining, and build Bitcoin City.
After recognizing the first cryptocurrency as legal tender in September 2021, El Salvador began mining digital gold from the geothermal energy of a volcano the very next month.
They have their own goal to pass a law on digital assets and I think they will succeed!