El Salvador has announced plans to build a “Bitcoin City”, hedging its economic future on cryptocurrency.
The city will be built at the base of a volcano between La Unión and Conchagua, and will have a geothermal power plant to support crypto mining.
Bitcoin City will apparently be in the shape of a large coin, and to make it more attractive to investors, President Nayib Bukele said that the city will not have income, property, capital gains, or payroll taxes — just value-added taxes (VAT).
Further, he also painted a picture of a full-fledged city, with residential areas, commercial areas, restaurants, and an airport among other things. Half of the revenue from the VAT will be used to build up the city while the rest will be for upkeep and cleaning.
El Salvador also plans to issue a US$1 billion (~RM4.19 billion) developed by Blockstream on the Liquid Network. Blockstream’s Chief Strategy Officer, Samson Mow, said that half of the bond will be used to build mining and energy infrastructure for the city, while the other half will be used to buy more Bitcoin.
The 10-year bond will pay 6.5% initially and after five years, El Salvador will start selling off its cryptocurrency holdings and pay added dividends to bondholders. Mow said that Blockstream models predict that the bond will yield 146% annually after ten years have elapsed.
However, Bukele did not give a timeline of when construction of Bitcoin City will begin or complete but says that the public infrastructure would cost around 300,000 Bitcoins, which is currently worth around RM72 billion as of writing. In September, El Salvador became the first country to adopt Bitcoin as an official currency alongside the US Dollar, and currently holds at least 550 Bitcoins.