El Salvador has passed landmark legislation providing the legal framework for a Bitcoin-backed bond known as the Volcano Bond that will be used to pay down sovereign debt and fund the construction of its proposed Bitcoin City.
The bill passed on Jan. 11 with 62 votes for and 16 against, and is set to become law after it is ratified by President Bukele.
According to crypto exchange Bitfinex, which is the technology provider for the bonds, the Volcano Bond would allow El Salvador to raise capital to pay down its sovereign debt, fund construction of the Bitcoin City and create Bitcoin mining infrastructure.
The volcano descriptor for the bonds is derived from the location of the country’s Bitcoin City, which is set to become a renewable crypto-mining hub powered by hydrothermal energy from the nearby Conchagua volcano.
Bitfinex notes that the city would be a special economic zone similar to those seen in China, which would offer tax advantages, crypto-friendly regulations and otherwise incentivize Bitcoin businesses for its residents.
The bonds have been targeted to raise $1 billion for the country, with half of it going into building the special economic zone.
