The government of El Salvador, the first country in the world to adopt bitcoin as an official currency, has asked parliament to approve the issuance of bonds backed by the cryptocurrency, Reuters reports.

The Congress of the Central American country announced on Tuesday evening that it had received a legislative project aimed at regulating the issuance and sale of bonds to local and foreign investors.

The proposal comes a year after President Nayib Bukele announced he would issue so-called “volcanic bonds” to raise $1 billion to finance the “Bitcoin City” project, which involves building a city on the country’s coast powered by volcanic energy and where the only tax is VAT.

Bukele later discovered that the bonds were named after the 170 volcanoes in El Salvador that would provide the energy needed for bitcoin mining projects.

He had originally expected the bond issue to be completed early this year, but Finance Minister Alejandro Zelaya, one of Bukele’s closest allies, said the project had been delayed by the war between Russia and Ukraine.

The explanation is, to put it mildly, strange, financial analysts note that a more plausible option is related to the sharp fall in the price of Bitcoin this year and the decline in interest in cryptocurrencies around the world.

“Bitcoin country” risks becoming insolvent

In late July, El Salvador announced it would buy back $1.6 billion in bonds to avoid default as they traded at deep discounts on international markets after the country officially adopted bitcoin as its official currency last September.

Vice President Felix Ulloa later said in an interview with Bloomberg that China had offered to buy all of the country’s sovereign debt, although this did not appear to have been officially confirmed by Beijing.

“We will not sell to the first bidder, we will need to see the terms,” ​​Vice President Bukele said.

El Salvador’s president, an ardent promoter of cryptocurrencies, has campaigned for bitcoin to be adopted as an official currency to revive and modernize the economy, while saying residents of the country will be able to receive money from working relatives abroad without paying bank fees.

A large number of citizens of the Central American country work in the United States.

A plan that did not live up to expectations

So far, the Bukele administration has bought 2,392 bitcoins worth about $107 million, but they are now worth much less due to the cryptocurrency’s 2022 price crash.

However, the government of El Salvador has not bought bitcoins since July.

The plan submitted by Bukele’s government to Congress also includes expanding the legal framework for the implementation of all cryptocurrencies by the Central American country.

San Salvador’s Congress is authoritarianly dominated by Bukele’s New Ideas party and its allies, and the government enjoys the support of 64 of the 84 members of the unicameral parliament.

Only two of them did not vote to accept Bitcoin as an official currency last year.