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Many Salvadorans are skeptical about Bitcoin and its uneven entry has prompted protests against the government.
El Salvador plans to build the world’s first “Bitcoin City,” initially funded by Bitcoin-backed bonds, says President Nayib Bukele, doubling its commitment to leveraging cryptocurrencies to fuel investment in the Central American country.
Speaking at a closing ceremony for the promotion of Bitcoin in El Salvador, Bukel said the planned city in the eastern region of La Union would get geothermal energy from a volcano and would not charge any value-added tax (VAT).
“Invest here and make all the money you want to make,” Bukel said, dressed in white and wearing a baseball cap backwards, on Saturday at Mizata beach. “It’s a completely ecological city where a volcano works and energizes.”
Half of the VAT charged would be used to fund bonds issued to build the city, and the other half would pay for services such as garbage collection, Bukel said, estimating that public infrastructure would cost about $ 300,000 Bitcoin ($ 17.7 billion).
El Salvador became the first country in the world to adopt Bitcoin as its legal value in September.
Although President Bukele is well-known, opinion polls suggest that Salvadorans are skeptical of his love for Bitcoin, and his uneven entry has sparked protests against the government.
Comparing his plan to the cities created by Alexander the Great, Bukel said it would be a circular Bitcoin City with an airport, headquarters and shopping malls, and a central plaza designed to look like a Bitcoin symbol from the air.
“If we want Bitcoin to spread around the world, we should build some Alexandria,” Bukel, who was named “dictator” of El Salvador in September by 40-year-old Bukel, said in an apparent joke.
El Salvador plans to issue the initial bonds in 2022, Bukel said, suggesting it would be within 60 days.
‘Liquid network’
Samson Mow, chief strategy officer of technology provider Blockchain, said at the meeting that the first 10-year issue, known as the “volcano bond,” would cost $ 1 billion, backed by Bitcoin and carry a 6.5 percent coupon. Half of that would go to buying Bitcoin in the market, he said. Other links would follow.
After a five-year lockout, El Salvador would begin selling some of the Bitcoin used to fund the bond to give investors “an extra coupon,” Mow said, indicating that cryptocurrency values would continue to rise sharply.
“This will make El Salvador the financial center of the world,” he said.
The bond would be issued on a “liquid network”, a Bitcoin sidechain network. To facilitate the process, the government of El Salvador is working on a securities law, and the first license to operate an exchange would go to Bitfinex, Mow said.
The crypto exchange was listed as a book list of the bond in a presentation behind Bitfinex Mow.
After issuing 10 such bonds, Bitcoin would withdraw $ 5 billion from the market for several years, Mow said. “And if you get 10 more countries to make these bonds, that’s half of Bitcoin’s market cap.”
El Salvador’s first issuer of “game theory” bonds gave him an advantage, Mow said: “If Bitcoin reaches a million dollar in a five-year limit, and I think it will, they will sell Bitcoin in two quarters and recover that. 500 million dollars. ”
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