In addition, the “Digital Asset Issuance” Act would establish a regulatory agency and a legal framework for all digital assets. El Salvador has enacted unprecedented legislation creating the legal foundation for a Bitcoin-backed bond — the “Volcano Bond” — that would pay down the national debt and fund the development of its intended “Bitcoin City.”

The measure was passed on Jan. 11 with 62 votes in favor and 16 votes against, and it will become law if President Bukele ratifies it.

#Plenaria90✍🏻 Con 62 votos a favor, creamos la Ley de Emisión de Activos Digitales. pic.twitter.com/g1poXwLoH3

— Asamblea Legislativa 🇸🇻 (@AsambleaSV) January 11, 2023

In a Jan. 11 Twitter thread, the National Bitcoin Office of El Salvador announced the bill’s approval and stated that the bonds will be issued soon.

3/ El Salvador is the epicenter of Bitcoin adoption, and thus, economic freedom, financial sovereignty, censorship resistance & unconfiscatable wealth.

When we issue the first of the volcano bonds, we will once again be blazing the path forward for this new monetary revolution.

— The Bitcoin Office (@bitcoinofficesv) January 11, 2023

The Volcano Bond — or Volcano Tokens — would let El Salvador generate funds to pay down its sovereign debt, support the development of the Bitcoin City, and create Bitcoin mining infrastructure, according to Bitfinex, the bonds’ technology supplier.

The bonds’ volcanic description is inspired by the country’s Bitcoin City, which is planned to become a sustainable crypto-mining hub fuelled by hydrothermal energy from the nearby Conchagua volcano.

According to Bitfinex, the city would be a special economic zone similar to those found in China, offering tax breaks, crypto-friendly rules, and other incentives to Bitcoin firms for its people.

The bonds are expected to raise $1 billion for the country, with half of the proceeds going toward the construction of the special economic zone.

The tokenized bonds would be issued in US dollars, with a ten-year maturity date and a 6.5% annual interest rate, according to the first plan.

In addition to those released on Bitcoin, the measure provides a legal framework for all digital assets that are not Bitcoin and establishes a new regulatory agency in charge of enforcing securities legislation and protecting against criminal actors.