Last week, Nayib Bukele, El Salvador’s young president, announced that the government will build a “Bitcoin City”. It will be located at the base of the Conchagua volcano, along the Gulf of Fonseca. The government will take advantage of the location by building a geothermal power plant and using the volcano’s energy to power Bitcoin mining.
The construction will be funded by Bitcoin bonds. The government expects to raise 300,000 Bitcoins — according to Bukele, this will be enough to provide modern and convenient public infrastructure.
It is expected that the bonds will be issued in 2022. The construction will begin two months after the financing is ready.
“Invest here and make all the money you want. This is a fully ecological city that works and is energized by a volcano,” said Nayib Bukele.
El Salvador’s government has already launched a pilot Bitcoin mining enterprise at a geothermal power plant near the Tecapa volcano.
El Salvador will provide land and infrastructure and work on raising investment.
It will not levy any taxes except for the value-added tax. Half of the revenue gained from the VAT will be used to fund the municipal bonds and the other half to pay for the city’s infrastructure and its maintenance.
Apart from zero property, income, and municipal taxes, Bukele promised Salvadorans that the city would have zero CO2 emissions. It is intended as a completely eco-friendly project that will help people earn money.
The government plans to attract foreign investment for funding the city’s construction. According to Bukele, the city will have residential areas, malls, restaurants, and a port. Bukele also spoke about the potential of digital education, new technologies, and developing sustainable public transport.
El Salvador adopted Bitcoin as legal tender, alongside the US dollar, on September 7 and is now using a $150 million fund to back the cryptocurrency. The government also released a digital wallet app and offers $30 worth of credit in Bitcoin to every Salvadoran to promote the use of the cryptocurrency.
Opponents argue that Bitcoin offers no transparency which could potentially increase criminal activity in El Salvador, while the high volatility of Bitcoin could present significant risks to the owners. Bitcoin was created as a currency to be used outside national financial systems. Bukele believes that the cryptocurrency will attract more foreign investment to the country and allow Salvadorans who work abroad to send more money to their families at home.