The long-awaited release of El Salvador’s Volcano Bond is finally set. It has received regulatory approval and will open for trading early next year.
A December 11th statement from The National Bitcoin Office (ONBTC) of El Salvador says that the Volcano Bond was approved by the Digital Assets Commission (CNAD). ONBTC states they “anticipate the bond will be issued during the first quarter of 2024.”
El Salvador’s Bitcoin-friendly President Nayib Bukele jokingly reacted to the news writing on X, “Wen volcano bond?” He linked to several articles that mention the Q1 2024 release date.
The bond will be a Bitcoin-backed bond which is US dollar-denominated and pays a yield of 6.5%. The bond is set to be worth US$1 billion. Half of this amount will be used to buy Bitcoin and the other half will be allocated toward investment in infrastructure and Bitcoin mining. The launch of the bond has been delayed because of factors like the low trading price of BTC in 2022 and underdeveloped Capital markets in El Salvador.
The Volcano Bond is set to be accessible via the Bitfinex Securities platform. Bitfinex Securities is a provider of blockchain-based investment products, regulated in Kazakhstan and El Salvador. The Bitfinex securities platform is designed to facilitate the raising of capital for issuers who seek to have their tokenized securities accessible on a public trading platform. Bitfinex securities do have an “admission to trading” process for investors and traders.
El Salvador’s new Golden Visa program criticized for high costs
On December 7th, the “Adopting El Salvador Freedom Visa Program” was announced. The new program is El Salvador’s new citizen-by-investment initiative. It will grant residency visas and a pathway to citizenship to 1000 people willing to pay a US$1 million Bitcoin or Tether investment into the country. Applicants begin with an initial US$1000 deposit and pass a KYC process.
The announcement of the visa program explains that the “visa program is designed to foster an environment where individuals contribute to shaping a new socio-economic landscape for El Salvador, a growing hub of international tourism, and attract individuals deeply committed to catalyzing economic expansion and driving transformative societal change.”
The new Salvadoran Visa program has already received criticism for its high costs. Neighboring Caribbean countries including Antigua and Barbuda, Dominica, St. Lucia, and Grenada offer full citizenship for a contribution towards a sovereign development fund of US$100,000-US$150,000. Malta offers a US$750,000 citizenship by investment program. Malta is a member of the European Schengen region and citizens have visa-free access to this region.
Additionally, numerous other major desirable nations are offering ‘golden Visa’ options that generally offer residency or a pathway to citizenship Visa. This includes countries like Portugal, Thailand, and Greece. Thailand’s golden visa costs just US$19,000.
According to VisaGuide.World, conventional CBI programs, as observed in countries like Malta, Portugal, and St. Kitts and Nevis, typically necessitate significant financial commitments in real estate, funds, or national development. These programs cater to high-net-worth individuals seeking a second passport or residency.
There has been significant criticism on social media for the uncompetitive nature of the “Adopting El Salvador Freedom Visa Program”.
El Salvador launches its first mining pool as Volcano Energy teams up with Luxor
In October, Bitcoin nation El Salvador launched its first-ever Bitcoin mining pool in partnership with well-known firm Luxor. The pool is set to utilize El Salvador’s significant Geo-Thermal renewable energy reserves.
Volcano Energy is El Salvador’s US$1 billion renewable energy initiative that has attracted global attention and investors like Tether. The project aims to create solutions to power El Salvador with renewable energy and use it to create productive Bitcoin mining solutions in the country. It is a public-private partnership with 23% of the initiative’s net income being sent to the Salvadoran government.
Volcano’s first-ever mining pool will tap into Luxor’s experience providing Bitcoin mining software. It will utilize Luxor’s Hashrate Forward Marketplace, which allows partners to hedge against Bitcoin price or energy volatility. This is set to allow Volcano to mitigate against the market volatility inherent to mining BTC.
“Lava Pool is another example of El Salvador’s first mover advantage as a nation-state in the Bitcoin ecosystem,” said Volcano Energy’s CSO, Gerson Martinez. The partnership and project are part of a wider plan to integrate Bitcoin into El Salvador’s energy infrastructure. The immediate revenue offered by Bitcoin is viewed as a strong option for rural areas of El Salvador. This can create an effective outlet for energy providers to manage load and support plants during periods of stress.
The plan for El Salvador’s Bitcoin mining also involves re-investing the profits earned on enhancing energy transmission and distribution infrastructure, strengthening the nation’s energy security.
Extra Bites
El Salvador enjoys a period of steady economic growth and dipping inflation
According to an announcement on the 7th of December, the El Salvador economy is set to grow by 2.7% in 2023. Douglas Rodríguez, President of the Central Reserve Bank (BCR), confirmed these numbers and discussed factors driving this growth during a television appearance. Rodriguez pointed to the Bukele government’s security and tourism as key drivers. He says that improved security in the country has led to an environment where business operators no longer have to worry about extortion.
International Tourism has observed a 34% increase in tourism in 2023, with the country hosting 2.6 million visitors between January and October. Rodriguez also endorsed the appeal of El Salvador to foreign investors, thanks to the more secure and robust economic conditions.
Combined with steady growth, the inflation rate in the country is also dropping, an appealing combination for any country. The inflation rate in El Salvador currently sits at 2.7%, the lowest level it has been at since June 2021, following 14 months of dropping rates.
Introducing Volcan Capital – a LATAM Focused Fund Builder
Volcan Capital, a fund-builder for El Salvador and the LATAM region, is closely watching developments in Argentina. Milei’s focus on decentralizing the Argentine economy to awaken South America’s second-largest economy resonates with our own vision.
The motivation to build Volcan Capital has been El Salvador’s non-traditional growth plan and the radical steps it has taken to move away from a political and economic pattern of corruption, debt, and disappointing economic growth. Milei’s intention to change a broken status quo may be exactly what Argentina needs.
On the other hand, Milei’s dollarization plan may be a flawed escape route from constant inflation. This is evidenced by El Salvador, where dollarization has shoved public debt higher, led to a reliance on remittances, and left the economy with no room to maneuver.
In El Salvador, Bitcoin, a more private form of money than the USD, has been adopted as an alternative legal tender, to free the economy. Perhaps dollarization is the step before Bitcoinization for Milei.
