El Salvador’s Bitcoin bond set to pave way for regulated security tokens

President Bukele surprised the world with ambitious plans for a ‘Bitcoin city’ at the foot of El Salvador’s now famous Conchagua Volcano – to be paid for by a proposed new security token asset class ‘tokenised bonds’.

Half of the billion dollar bond will be spent building out the key infrastructures for the new city – on the site of innovative geothermal Bitcoin mining – which aims to become a hub for the crypto industry in what is quickly becoming known as ‘Decentral America‘.

The other half will be used to purchase spot Bitcoin (BTC), to be locked away for five years in an effort to reduce circulating supply and enhance supply shock.

The Bitcoin bond will be offered, through Blockstream, on the Liquid Network – a settlement side-chain that boasts security token issuance functionality (powered by network native 1:1 token L-BTC) following an approval by Germany’s BAFIN regulator.

Blockstream also marks an interesting choice of issuance platform due to the size of the stake held by major investor iFinex – the parent company of Bitfinex.

iFinex has a special role working with Bukele – “to create and implement appropriately balanced cryptocurrency laws, regulations, rules, and guidelines, particularly as they relate to digitised financial instruments in order to promote the growth of the cryptocurrency sector in El Salvador”.

Bitfinex securities designing security token framework

In exclusive comments to Coin Rivet, a senior Bitfinex spokesman explained that “the bond will be available to all Bitfinex Securities users that have undergone full KYC checks while also meeting the requirements imposed by the new securities law being developed in El Salvador”.

“The Volcano Bond offering could help provide the country with the resources to continue to invest and grow its bitcoin-related efforts,” the source added.

For many in the security token niche, the partnership represents a huge opportunity and signals that El Salvador is preparing an attractive regulatory environment for tokenised asset fractionalisation – a rapidly emerging space with green lights from regulators in Switzerland, Hong Kong and Malaysia.

The presence of Bitfinex Securities in designing the regulatory framework is reassuring for the security token space, and promises an institutionally-minded approach to a potentially $160tn token niche.

“Security tokens are one of the more interesting innovations that seem set to flourish in the coming months and years,” added the senior Bitfinex spokesman.

“Bitfinex is grateful and humbled to help lead this process.”

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