El Salvador aims to establish the world’s first “Bitcoin City,” first funded by bitcoin-backed bonds, President Nayib Bukele announced on Saturday, doubling down on his bet that the crypto currency will help the Central American country attract investment.
Bukele claimed the city planned in the eastern district of La Union would get geothermal power from a volcano and would not collect any taxes save a value added tax, speaking at an event concluding a week-long promotion of bitcoin in El Salvador (VAT).
“Invest here and make all the money you want,” Bukele remarked in English in the seaside town of Mizata, clad completely in white and sporting a reversed baseball cap. “This is a fully ecological city that works and is energized by a volcano.”
Bukele estimated that the public infrastructure would cost roughly 300,000 bitcoins and that half of the VAT levied would be used to fund the bonds issued to develop the city, and the other half would be used to pay for services such as garbage collection.
El Salvador became the first country in the world to recognise bitcoin as legal cash in September.
Despite the fact that Bukele is a popular president, opinion polls reveal that Salvadorans are dubious of his enthusiasm for bitcoin, which has sparked anti-government protests due to its rocky launch.
Bukele said Bitcoin City would be circular, with an airport, residential and business sections, and a centre plaza designed to look like a bitcoin symbol from the air, like towns created by Alexander the Great.
“We need create several Alexandrias if you want bitcoin to expand over the world,” said Bukele, a tech-savvy 40-year-old who in September declared himself “dictator” of El Salvador on Twitter in an apparent joke.
El Salvador intends to issue the first bonds in 2022, according to Bukele, implying that it will happen within 60 days.
The first 10-year issue, dubbed the “volcano bond,” will be worth $1 billion, backed by bitcoin and have a 6.5 percent coupon, according to Samson Mow, chief strategy officer of blockchain technology provider Blockstream. He stated that half of the funds would be used to purchase bitcoin on the open market. Other bonds would inevitably follow.
El Salvador will begin selling some of the bitcoin used to fund the bond after a five-year lock-up period to provide investors with a “additional coupon,” according to Mow, who believes the cryptocurrency’s value will continue to climb strongly.