El Salvador’s Freedom Visa and Volcano Bonds

The next phase of the country’s crypto evolution

Last week, El Salvador introduced a new Freedom Visa, to encourage crypto investment in the small Central American nation. On December 11, their Digital Assets Commission approved a $1 billion “Volcano Bond” which will be issued in Bitcoin. El Salvador has previously made headlines after it became the first nation to adopt Bitcoin as a national currency under President Nayib Bukele.

The Freedom Visa grants residency to anyone who invests $1 million in Bitcoin or Tether in El Salvador. 1000 Freedom Visas are available annually, meaning El Salvador could receive $1 billion in crypto investment if the program is filled. The application is administered by Tether and costs a non-refundable $900 fee.

In addition, the long-anticipated Volcano Bond, after a long series of regulatory hurdles, has been cleared to issue to Q1 2024. The bond will be used in part to raise capital for La Unión, aka “Bitcoin City,” an ambitious plan for a new city, shaped like a circular coin and powered geothermally by the Conchagua volcano. The Volcano Bond will last 10 years and pay 6.5% annually to holders. It will be issued on Bitfinex, a crypto platform based in El Salvador.

El Salvador has embraced Bitcoin since 2021, when it became the first nation to adopt Bitcoin as legal tender. This move was promoted by President Nayib Bukele, elected in 2019, who made Bitcoin a huge part of his identity and became a fixture on Crypto Twitter.

El Salvador abandoned its own peso in 2001, when it adopted the US dollar in order to increase financial stability and encourage foreign investment. Bukele promoted Bitcoin adoption as a means of reducing El Salvador’s dependence on the United States, as well as reducing costs for foreign remittances and increasing access to banking. El Salvador’s government has invested  in Bitcoin under Bukele, with a $130 million total holding that, following the recent bull run, went into the black.

Despite this, El Salvador does not lead the world in crypto adoption. Just 1.72% of its 6.3 million
Salvadorians own crypto. This is similar to the rest of Central America, with its neighbors Guatemala at 1.34% and Honduras at 2.22%. Compare this to the world leader, Vietnam, at 21.19% adoption, or even the United States at 14.36%, India at 6.55%, or Russia at 5.87%.

Furthermore, Bitcoin has failed to become a dominant currency for international remittances, which is big business in El Salvador. Salvadorians living abroad send $400 million back home every year, but remittances in Bitcoin account for only 1.9% of that flow.

Some of that slow adoption can be traced to a sloppy rollout of the Bitcoin program in 2021. Identity thieves exploited the Chivo Wallets which were given to residents, stealing their identity numbers and the $30 Bitcoin bonus they were meant to receive. In total, El Salvador is estimated to have invested $425 million in its Bitcoin experiment, including its national holdings.  

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