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| President Bukele announcing Bitcoin City. |
El Salvador, the Central American country plans to build a city based on the world's largest cryptocurrency. President Nayib Bukele announced the Bitcoin City initiative at El Salvador's Bitcoin week conference on Saturday night. This conference is a celebration of Bitcoin's mainstream adoption in the country.
"Invest here and make all the money," Bukele, who dressed all in white and wearing a baseball cap backwards, said in the beach resort of Mizata. "This is a full ecological city that works and is energised by a volcano."
In partnership with crypto firms Blockstream and BitFinex, Bukele plans to issue $1 billion in tokenized USD-denominated 10-year bonds to fund this project.
The Bitcoin City Project plan
Paolo Ardoino, Bitfinex CTO, says the exchange will support the initiative by launching a securities platform to hold the bonds.
"Finex will launch a securities platform that will be the home of ES bitcoin bonds and soon many local and foreign digital assets offerings developing new digital asset regulation for the country! El Salvador, @bitfines and @blockstream are making history together." -Paolo Ardoino (@paoloardoino) November 21, 2021
Blockstream Chief Security Officer Samson Mow also clarified the feasibility of sourcing the $1 billion Bitcoin bonds.
"Whit Bitfinex, they have a lot of whales. I don't see a problem filling up a $1 billion bond."
In an
announcement by Blockstream, Mow also said that the $1 billion will be split into two parts. $500 million will go towards building energy and Bitcoin mining infrastructure in the region. The other $500 million worth of BTC will be locked up for five years. Mow further stated that after the five-year lock-up period, El Salvador would start selling some of the bitcoin used to fund the bond to give investors an "additional coupon," "This is going to make El Salvador the financial centre of the world," he said.
The Salvadoran president added that the bonds will be available in 2022. He plans on locating the proposed Bitcoin City near a volcano. The idea is to provide energy for both the city and bitcoin mining, he said.
According to President Bukele, Bitcoin City will be a full-fledged metropolis with residential and commercial areas. It would also have shopping centres, restaurants, a port, an airport, and railway services. There would be no income, property, capital gains, or payroll taxes, Residents would, however, be subject to just value-added tax (VAT). This tax will go towards paying for the municipality's bonds, public infrastructure, and city maintenance.
Half of the VAT levied would be used to fund the bonds issued to build the city, and the other half would pay for services such as garbage collection, Bukele said, estimating the public infrastructure would cost about 300,000 Bitcoins.
"In Bitcoin City, we will have digital and technological education Geothermal energy for the entire city and efficient and sustainable public transport," said Bukele.
El Salvador in September became the first country in the world to
adopt Bitcoin as legal tender.
Mainwhy, opinion polls show Salvadorans are sceptical about president Bukele's love of Bitcoin, and its bumpy introduction has fuelled protests against the government.
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