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Crypto bonds! Volcanoes! What we know about the first ‘Bitcoin City’

El Salvador's president has ambitious plans

Crypto bonds! Volcanoes! What we know about the first ‘Bitcoin City’
Thomas Macaulay
Story by

Thomas Macaulay

Writer at Neural by TNW — Thomas covers AI in all its iterations. Likes Werner Herzog films and Arsenal FC. Writer at Neural by TNW — Thomas covers AI in all its iterations. Likes Werner Herzog films and Arsenal FC.

Crypto bros could soon have a new dream destination. At a conference on Saturday, the president of El Salvador unveiled plans to build the world’s first “Bitcoin City.”

Dressed in all white and donning a backward baseball cap, President Nayib Bukele looked more like a pop star than a politician as he described an ecological metropolis funded by Bitcoin-backed bonds.

He compared his strategy to that of Alexander the Great founding cities that he humbly named after himself:

The idea behind it was that these Alexandrias be the beacons of hope for the rest of the world; that all of the world could be like that… so I thought, if you want Bitcoin to spread all over the world, we should build some Alexandrias.

 

Bukele, who once “jokingly” described himself as “the coolest dictator in the world,” shared some key details on how he hoped to build his Alexandria.

Volcano power

Bukele said the city would be built near the Conchagua volcano in southeastern El Salvador. The volcano would provide geothermal power for both the city and Bitcoin mining.

“This is a fully ecological city that works and is energized by a volcano,” said Bukele.

It wasn’t the first time that Bukele has touted this approach. In October, the 40-year-old said the country had started mining Bitcoin using geothermal energy, which accounts for around 21% of El Salvador’s electricity generation.

 

Covering the costs

The city will be funded by a sales tax and an issue of $1bn in sovereign bonds backed by Bitcoin, Bukele told the raucous crowd at the beach resort of Mizata. 

Half of the $1 billion in bonds will go towards building energy and mining infrastructure, while the other half will be invested in bitcoin. 

The bond will be managed by blockchain tech firm Blockstream and issued on the “liquid network,” a Bitcoin sidechain network.

Samson Mow, chief strategy officer of Blockstream, said El Salvador also aims to create a government securities law and grant a license to Bitfinex Securities, a crypto exchange, to process the bond issuance.

The coming digital securities laws in El Salvador will make it the new center of the financial world,” he said.

Bukele promised that there would be no income, capital gains, property, payroll, and municipal taxes.

The only tax collected will be a 10% value-added tax. Half of this will be used to pay for the bonds, and the rest will be invested in municipal works.

Bukele also said the city would have zero carbon dioxide emissions.

City planning

Bukele said the city will have the circular shape of a coin and be constructed in the Gulf of Fonseca:

It’s gonna include everything: residential areas, commercial areas, services, museums, entertainment bars, restaurants, airport, port, rail — everything.

He said construction of the city will begin 60 days after the bond offering, which will take place in 2022.

The announcement forms part of Bukele’s plans to create a global crypto hub.

In September, El Salvador became the first country to adopt Bitcoin as legal tender. The government also launched a digital wallet app loaded with $30 for every Salvadoran citizen who downloaded it.

Bukele says his strategy will boost the economy and job market, but critics have raised concerns about bitcoin’s volatility and potential for money laundering. Bukele has also been accused of pushing his country in an authoritarian direction.

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