President Nayib Bukule made himself even more popular in the bitcoin world last week. He announced the construction plans of a bitcoin city during the Bitcoin week conference in El Salvador. The project must be financed through bitcoin bonds.

El Salvador continues to lead the way in embracing bitcoin. Earlier this year, the president of the Latin American country announced that it would recognize bitcoin as legal tender. It is the first time that one can speak of Bitcoin adoption by a country. Since September 8, 2021, the digital currency is one of the country’s two official currencies.

News followed soon after that the country’s government had purchased its first batch of bitcoin. The president announced via a tweet that the purchased bitcoin is kept in a management fund together with other savings in dollars. When the price of bitcoin rises, the government can use the dollars for, for example, the construction of hospitals and schools without selling the bitcoin, while the total value nominated of the fund in dollars remains about the same.

Furthermore, the plans to do bitcoin mining with sustainable electricity generated from the heat of volcanoes have become reality. In a tweet, the president shows that the first bit of bitcoin has been successfully mined with renewable energy generated by the volcano’s heat.

Bitcoincity

During the Bitcoin week conference in El Salvador, the president announces the construction plans of Bitcoin City. The city, located in the east of the country, is to be built on the edge of a volcano that will also be used to generate renewable energy.

Bitcoin city must become a complete city with its own shopping center, airport, apartments, residential areas, entertainment venues and port. A large square in the shape of the bitcoin logo will be built in the middle of the city. Naturally, the digital currency will also be accepted as a means of payment here.

During the presentation, Bukule explains that the construction of the city will be financed by bitcoin bonds. The issuance of these bonds will begin in early 2022 with the help of bitcoin companies Blockstream and Bitfinex. Investors in the bond are promised an interest rate of around 6.5%. The plan is to raise $1 billion, half of which will be invested in bitcoin. The other half will be used to build the city’s energy infrastructure. We will take a closer look at these bitcoin bonds in a future article.

The president further promises that residents of Bitcoin city will not have to pay income tax, capital gains tax, payroll tax or council tax. Only value added tax (VAT) will remain. This will pay for the construction of the city and the interest on the bitcoin bonds.

?ǣInvest here and make all the money you want. This is a completely ecological city that gets its energy from a volcano’ , says Bukule with his hat backwards during the presentation.

Criticism

The ambitious plan is not appreciated by everyone. For example, the International Monetary Fund has announced that Bitcoin should not be legal tender. In a report, the IMF explains that the bitcoin law in El Salvador carries great risks and that the country should implement stricter regulations. The report does not discuss the plans for bitcoin city and the associated bitcoin bonds. The financial regulator does say that the plans of the Salvadoran government to buy more bitcoin must first make a “very thoughtful analysis of the possible implications and risks for the financial stability in the country”.

In an interview, Blockstream chief operations officer Samson Mow said concerns about the relationship between the IMF and El Salvador are unlikely to deter investors in bitcoin bonds.

?ǣI don’t think organizations like the IMF or the World Bank are relevant in a post-hyperbitcoinization world,?ǥ said Mow.

El Salvador would initially borrow a billion from the IMF at low interest rates. The introduction of the bitcoin law has ensured that it did not go ahead. If the bitcoin bond becomes a success, El Salvador will regain some independence and independence.

Read our dossier on bitcoin in El salvador here.