El Salvador’s bitcoin “volcano bond” gets approved as the country doubles down on crypto
For the crater good… El Salvador’s proposed volcano bonds erupted back into public consciousness this week after the country’s crypto regulator said they could be issued within months. First proposed in 2021, the bonds sought to raise $1B to purchase bitcoin and build Bitcoin City — a tax-free zone in the Central American country that would host crypto miners powering their rigs with renewable geothermal energy from a volcano.
Coin of the realm: Also in ’21, El Salvador became the first country to make bitcoin legal tender (alongside the US dollar), but to mixed results. It’s since spent $100M+ on BTC.
Freedom isn’t free: Last week the country announced its Freedom Visa program. People can give the government $1M worth of bitcoin or tether in exchange for a long-term residency permit and a path to citizenship.
Power-hungry computers… Crypto mining is highly energy-intensive. Enter El Salvador, a top geothermal-energy producer, which said it used volcano-generated power to mine bitcoin two years ago. Mining companies have long sought alt power sources to lower operation costs: in 2018, miners flocked to Iceland partly because of its cheap geothermal power. Bit Digital said this summer that it planned to expand its presence there. In the US, Marathon Digital said it’d use methane off-gassing from a Utah landfill to power its rigs.
Leaning in can be risky… Demand for cheaper crypto-mining infrastructure is there, but it’s TBD whether El Salvador’s big bet will pay off for the debt-laden country. The more it invests in crypto with projects like Bitcoin City, the more it’s subject to price swings. The IMF is worried that crypto volatility poses risks to El Salvador’s economy, which is already one of Central America’s poorest. Just two years ago, 65% of Salvadorans didn’t want the gov’t spending money on BTC, with 80% saying they lacked confidence in the coin.