El Salvador’s president, Nayib Bukele, plans to build a Bitcoin city at the base of the Conchaga volcano. The city will have the shape of a large coin and will use the volcano’s geothermal energy to power Bitcoin mining.
The city will have residential and commercial areas, services, entertainment, restaurants and an airport and will be built near Conchagua volcano in south eastern El Salvador.
Construction will begin in 2022 and the city will have no taxes except from value added tax (VAT).
In September, thousands of people took the streets to protest against the law, fearing the introduction of the cryptocurrency could lead to instability in the central American nation.
While it should include the full amenities you’d expect from a city, people in La Unión could travel to work in the new development.
Speaking at an event closing a week-long promotion of bitcoin in El Salvador, Bukele said the city planned in the eastern region of La Union would get geothermal power from a volcano and not levy any taxes except for value added tax (VAT).
“Invest here and make all the money you want,” Bukele said in English, dressed all in white and wearing a reversed baseball cap, in the beach resort of Mizata. “This is a fully ecological city that works and is energized by a volcano.”
Bukele didn’t provide a timeline for the city’s creation. However, he simultaneously unveiled a $1 billion US “Bitcoin bond” where half would be used to build energy and mining infrastructure, with the rest used to buy more of the digital currency.
The strategy chief for bond developer Blockstream, Samson Mow, said El Salvador would start selling crypto holdings after five years and pay an extra dividend to bond holders. With an initial 6.5 percent yield, this could represent a significant windfall for the country if all goes well.
The move is a huge gamble for a country with a gross domestic product of just over $24.6 billion in 2020. Bukele’s administration is counting on Bitcoin to spur economic growth, independence and investment, but this also assumes the monetary format remains on an overall upward trajectory.
It’s also unclear if would-be residents and investors will flock to a Bitcoin-oriented city even with tax incentives. This is new territory for cryptocurrency, and it’s not certain if there’s enough support to help the project thrive.
Separately, El Salvador plans to raise about $1 billion via a “Bitcoin Bond” in partnership with Blockstream, a digital assets infrastructure company. Half of the funds will be used to buy bitcoin, while the other $500 million will go toward energy and bitcoin mining infrastructure, the government said.
Mining is the energy-intensive process of creating new bitcoin by solving cryptographic puzzles. El Salvador said it plans to use geothermal energy from the volcano to power this.
This could be huge opportunity for El Salvador and for Bitcoin holders, though it is still unclear as to whether this new project will be successful and profitable.
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