El Salvador appears to be planning a future that is totally linked with bitcoin. The Netherlands, which made history in September by becoming the first sovereign nation to make bitcoin legal tender, has taken another step ahead in its cryptocurrency acceptance. El Salvador has announced the next step of BTC adoption after investing millions of dollars in digital assets. This time, it’s in the shape of a Bitcoin City.
President Nayib Bukele, who has become well-known for his drive for bitcoin adoption, has revealed plans to construct a Bitcoin City in the country. The city will be built in La Union’s eastern section and will be fueled by geothermal energy from a volcano. Except for a value-added tax, the city would be completely tax-free (VAT).
El Salvador’s futuristic metropolis was announced to applause from participants during a week-long BTC campaign throughout the country. The country’s adoption of bitcoin has been pushed by the country’s tech-savvy and bitcoin maximalist president, albeit this has not been without controversy.
Nonetheless, Bukele remains adamant about the country’s adoption of bitcoin, claiming that “this is going to make El Salvador the financial hub of the globe.” Furthermore, residents of the proposed Bitcoin City would be able to enjoy gains from their crypto holdings without having to pay taxes on them. “Invest here and make as much money as you want,” said the president.
The anticipated cost of constructing Bitcoin City is roughly 300,000 BTC. El Salvador will issue the world’s first bitcoin bonds to fund the project. The $1 billion bonds would be paid for with a portion of the value-added tax (VAT) levied on residents. Bonds will endure for ten years and provide a 6.5 percent annual return on investment.
According to Blockstream’s Chief Strategy Officer, Samson Mow, the tokenized bonds would be denominated in US dollars and issued over the Liquid Network. According to Mow, the bonds have been in the works for months after they were first offered to the president following discussions on El Salvador’s plans to use BTC as legal cash.
The $1 billion raised will be divided into two halves. First and foremost, $500 million will be used to purchase additional bitcoin. This will greatly increase El Salvador’s BTC holdings. The remaining monies will be used to construct electricity and mining infrastructure for the city.
Although Mow anticipates that the $1 billion bonds would fill rapidly owing to whale participation, the bond has been democratized to remove barriers to access. Mow stated in his statement that investments as little as $100 would be permitted for the bond.
El Salvador intends to enact a government securities law, as well as provide Bitfinex Securities a license to process the bond to enable the establishment of the bond. “This could pave the way for other Liquid security tokens, such as the Blockstream Mining Note (BMN) or Exordium (EXO), to be listed on a regulated El Salvadorian securities exchange,” Mow stated.