Bukele: El Salvador is going to build a ‘Bitcoin City’

El Salvador’s president Nayib Bukele said on Saturday that his country plans to build the first “Bitcoin City.”

The city is powered by a volcano

The city will be located in the eastern department of La Unión, between the municipalities of La Unión and Conchagua. The cost of developing the so-called “Bitcoin City” will be financed from the outset through the issuance of multi-billion dollar Bitcoin-backed bonds in 2022.

Bukele appeared in person at the end of a Bitcoin conference in El Salvador. His appearance was heralded with fireworks.

Bukele told the assembled crowd that the Bitcoin city will run on geothermal energy from nearby volcanoes. Also, it will be tax free except value added tax (VAT). Bukele said:

“Invest here and earn all the money you want. This is a fully ecological city that works and is powered 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. The other half would be used to fund public services, Bukele said. He also said that 300,000 Bitcoins will be needed to complete the city’s infrastructure.

Bukele’s Alexandria

There are few details about what exactly Bukele’s “Bitcoin City” is all about. The head of state hopes to attract foreign Bitcoin investment to the city. He said, “If you want Bitcoin to spread around the world, we need to build some Alexandrias.”

Bukele briefly sketched a vision of the topography of the city. He said the city will be round, and will contain an airport and residential and commercial districts. Furthermore, he said that the main square will resemble the Bitcoin symbol from above.

To issue the bonds, El Salvador deals closed with Blockstream and iFinex. iFinex will be the government bookrunner and help it write new digital tokenized securities laws. The government will then grant iFinex the first license under this new regulatory framework, allowing it to issue multi-billion dollar Bitcoin-backed bonds on Bitfinex securities.

Samson Mow, CSO of Blockstream, also appeared at the event. He confirmed that the bonds will be issued on Blockstream’s Liquid Network.

From legal tender to Bitcoin City

El Salvador made Bitcoin legal tender on September 7 this year. However, the decision was met with strong criticism from the political opposition and skepticism from most residents. Ethereum founder Vitalik Buterin said Bitcoin’s adoption in El Salvador was “contrary to the ideals” of crypto. In a blog post, Buterin explained:

“This tactic of pushing BTC to millions of people in El Salvador at the same time without almost any prior education attempt is reckless. There is a risk that a large number of innocent people will be hacked or scammed. Bitcoin Maximalists, shame on you.”

But it has not been all criticism. Bukele’s overt Bitcoin maximalism has earned him respect among Bitcoin investors such as MicroStrategy CEO Michael Saylor and crypto podcaster Peter McCormack.

Still, despite criticism from all quarters, Bukele has moved forward with its Bitcoin adoption plans. On October 1, Bukele tweeted that El Salvador had started mining Bitcoin using geothermal energy. Last month, El Salvador reported that its Bitcoin trust was in surplus of $4 million as a result of the currency’s rising prices. Bukele announced that he would use the money to build an animal hospital.

Bitcoin wallet Strike was one of the partners of El Salvador’s Bitcoin adoption process. On October 14, El Salvadorans noticed a new “Pay me in Bitcoin” feature that converts direct bank deposits into Bitcoin.

At the end of last month, Bukele took advantage of a drop in Bitcoin prices to add an additional 420 Bitcoins to the country’s treasury. This brought El Salvador’s total Bitcoin holdings to 1,120 BTC.

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