El Salvador Plans First ‘Bitcoin City’, Backed by Bitcoin Bonds
President Nayib Bukele said El Salvador plans to build the world’s first “Bitcoin City”, funded initially with bitcoin-backed bonds, while doubling its stake to Cryptocurrency mining to promote investment in Central American country.
Speaking at a closing event of a week-long bitcoin promotion in El Salvador, Bukele said the planned city in the eastern region of La Union would draw geothermal energy from a volcano and not tax any tax except value added tax (VAT).
“Invest here and earn all the money you want,” said Bukele in English, wearing white and an upside down cap, in the Mizata beach resort. “This is a fully functioning eco-city and is powered by a volcano.”
Half of the VAT collected will be used to finance bonds issued to build the city and the other half will pay for services such as waste collection, Bukele said, estimating the infrastructure The public tier will cost around 300,000 bitcoins.
El Salvador in September became the first country in the world to accept bitcoin as legal tender.
Although Bukele is a popular president, opinion polls show Salvadorans doubt his love for bitcoin and its bumpy birth has fueled protests against the government. government.
Like his plans for cities founded by Alexander the Great, Bukele said Bitcoin City will be circular, with an airport, residential and commercial areas and have a central square designed to look like the bitcoin icon from the air.
“If you want bitcoin to spread around the world, we should build some Alexandria,” said Bukele, a tech-savvy 40-year-old who in September called himself a “dictator” of El. Salvador on Twitter in an apparent joke.
Mr. Bukele said El Salvador plans to issue initial bonds in 2022, and suggested a duration of 60 days.
Samson Mow, chief strategy officer at blockchain technology provider Blockstream, told Cointelegraph that the first set of 10-year issuances, known as “volcanic bonds,” will be worth $1 billion, backed by bitcoin. and bring 6.5% coupon. Half of the money will be used to buy bitcoin on the market, he said. Other bonds will follow.
After five years of lockdown, El Salvador will start selling some of the bitcoin used to fund the bonds to give investors an “additional coupon,” Mow said, noting the value of the money. electronics will continue to increase strongly.
“This will make El Salvador the financial center of the world,” he said.
The bonds will be issued on the “liquid network”, a bitcoin sidechain network. To facilitate this process, the El Salvador government is working on securities laws and the first license to operate the exchange will go to Bitfinex, Mow said.
Cryptocurrency exchange Bitfinex has been listed as the leader for bonds in a presentation behind Mow.
Mow said that once 10 such bonds are issued, $5 billion in bitcoin will be on the market in a few years. “And if you have 10 more countries to exercise these bonds, that’s half the market capitalization of bitcoin there.”
“Game theory” on bonds has given El Salvador’s first issuer an edge, Mow argues, saying, “If bitcoin at the five-year mark hits $1 million, I think so, they’ll sell. bitcoin for two quarters and recoup that $500 million.”