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Bitcoin-backed bonds, which may be issued in less than two months, will finance the initial development expenditures.
El Salvador’s Bitcoin-friendly president, Nayib Bukele, declared on Saturday during a Bitcoin investment meeting that his country aims to construct the first “Bitcoin City.”
The city will be located between the municipalities of La Unión and Conchagua in the eastern department of La Unión.
The first costs of creating the so-called “Bitcoin City” will be covered by the issue of billion-dollar bonds backed by Bitcoin in 2022.
Bitcoin maxi Bukele appeared in person to deliver his address at the close of a week-long Bitcoin conference in El Salvador. His appearance was heralded by some high-budget production and fireworks.
Bukele told the assembled crowd that Bitcoin City will rely on geothermal energy from nearby volcanoes, and it will be tax-free except for value-added tax (VAT). Said Bukele: “Invest here and make all the money you want. This is a fully ecological city that works and is energized by a volcano.”
Half of the money raised through VAT would be used to pay off the bonds issued to fund the city’s startup costs, while the other half would be used to fund public services, said Bukele, who said 300,000 Bitcoins will be needed to complete the city’s infrastructure.
Details of exactly what Bukele’s “Bitcoin city” entails are thin, but the leader hopes to attract foreign Bitcoin investment into the city. He said: “If you want bitcoin to spread over the world, we should build some Alexandrias.”
Bukele briefly sketched a vision of the topography of the city and said that it will be circular, and will contain an airport and residential and commercial districts. He also said the central plaza will look like the Bitcoin symbol from above.
In order to issue the bonds, El Salvador has struck deals with Blockstream and iFinex. iFinex will be the government’s bookrunner, helping it to write new digital tokenized securities laws. The government will then give iFinex the first license in this new regulatory framework so that it can issue Bitcoin-backed billion-dollar bonds on Bitfinex securities.
Samson Mow, CSO of Blockstream, also appeared at the event and confirmed that the bonds will be issued on Blockstream’s Liquid Network.
From legal tender to Bitcoin City: El Salvador’s path to adoption
El Salvador made Bitcoin legal tender on September 7 of this year, despite strong opposition from the political opposition and widespread distrust from the general public. El Salvador’s embrace of Bitcoin, according to Ethereum founder Vitalik Buterin, is “contrary to the objectives” of cryptocurrency.
In a blog post, Buterin elaborated: “This tactic of pushing BTC to millions of people in El Salvador at the same time with almost no attempt at prior education is reckless, and risks a large number of innocent people getting hacked or scammed. Shame on Bitcoin maximalists.”
But it hasn’t all been criticism though. Bukele’s overt Bitcoin maximalism has earned him respect among fellow maxis, like MicroStrategy CEO Michael Saylor and crypto podcaster Peter McCormack.
Despite the widespread criticism, Bukele has forged on with his Bitcoin adoption plans. Bukele said on October 1 that El Salvador had begun mining Bitcoin using geothermal energy.
El Salvador reported a $4 million excess in its Bitcoin trust last month, owing to the currency’s increased value. Bukele stated that he would use the funds to construct a pet hospital.
El Salvador’s Bitcoin adoption process has partnered with Strike, and on October 14, El Salvadorans noticed a new “Pay Me with Bitcoin” feature that converts direct bank transfers into Bitcoin.
At the end of last month, Bukele took advantage of a dip in Bitcoin prices to add 420 more Bitcoins to the country’s treasury, taking El Salvador’s total Bitcoin holdings to 1,120 BTC.