El Salvador to build eco-friendly city funded by... bitcoins

El Salvador, the first country in the world to adopt bitcoin as legal tender, plans to build the world's first “Bitcoin City”, funded initially by bitcoin-backed bonds, near the Conchagua volcano, the country’s president Nayib Bukele, who hopes to draw the attention of potential investors to this Central American republic, has announced.

N: El Salvador, the first country in the world to adopt bitcoin as legal tender, plans to build the world's first “Bitcoin City”, funded initially by bitcoin-backed bonds, near the Conchagua volcano, the country’s president Nayib Bukele, who hopes to draw the attention of potential investors to this Central American republic, has announced. Speaking at an event closing a week-long promotion of bitcoin in El Salvador, Mr Bukele, said the city planned in the eastern region of La Union would get geothermal power from a nearby volcano and not levy any taxes except for VAT.

“This is a fully ecological city that works and is energised by a volcano,” he stated, adding that the geothermal energy will power both the city and the cryptocurrency mine.

Half of the VAT levied would be used to fund the bonds issued to build the city, and the other half would pay for services such as garbage collection. The public infrastructure is set to cost around 300,000 bitcoins.

The Bitcoin City would be circular, with an airport, residential and commercial areas, and feature a central plaza designed to look like a bitcoin symbol from the air. Mr Bukele made it clear that he was inspired by ancient Alexandria.

Samson Mow, chief strategy officer of Blockstream, a company dealing with Bitcoin services, said that the first 10-year issue, known as the “volcano bond”, would be worth USD 1 bn, backed by bitcoin and carrying a coupon of 6.5 pct. Half of the sum would go to buying bitcoin on the market, while the other half would be spent on the infrastructure necessary for the city to operate.

After a five year lock-up, El Salvador would start selling some of the bitcoin used to fund the bond to give investors an “additional coupon,” whereas the value of the cryptocurrency would continue to rise robustly, according to Mr Mow.

The bond would be issued on the “liquid network”, a bitcoin sidechain network. To facilitate the process, El Salvador's government is working on a securities law, and the first license to operate an exchange would go to Bitfinex.

According to the country’s president, El Salvador plans to issue the initial bonds in 2022.

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