El Salvador floats plan to build world's first Bitcoin City

MIZATA (El Salvador) • El Salvador plans to build the world's first "Bitcoin City", funded initially by bitcoin-backed bonds, President Nayib Bukele has said, doubling down on his bet to harness the crypto currency to fuel investment in the Central American country.

Speaking on Saturday 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 volcano and not levy any taxes except for value-added tax (VAT).

"Invest here and make all the money you want," Mr Bukele said in English, dressed all in white and wearing a baseball cap, in the beach resort of Mizata. "This is a fully ecological city that works and is energised by a volcano."

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, Mr Bukele said, estimating the public infrastructure would cost 300,000 bitcoins.

El Salvador in September became the first country in the world to adopt bitcoin as legal tender.

Although Mr Bukele is a popular president, opinion polls show Salvadorans are sceptical about his love of bitcoin, and its bumpy introduction has fuelled protests against the government.

Likening his plan to cities founded by Alexander the Great, Mr Bukele said Bitcoin City would be circular, complete with an airport, residential and commercial areas, and feature a central plaza designed to look like a bitcoin symbol from the air.

"If you want bitcoin to spread over the world, we should build some Alexandrias," said Mr Bukele, a tech-savvy 40-year-old who in September proclaimed himself "dictator" of El Salvador on Twitter in an apparent joke.

El Salvador plans to issue the initial bonds next year, Mr Bukele said, suggesting that it would be in 60 days' time.

Mr Samson Mow, chief strategy officer of blockchain technology provider Blockstream, told the gathering that the first 10-year issue, known as the "volcano bond", would be worth US$1 billion (S$1.36 billion), backed by bitcoin and carry a coupon of 6.5 per cent.

Half of the sum would go towards buying bitcoin on the market, he said, adding that other bonds would follow.

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", Mr Mow said, positing that the value of the crypto currency would keep rising robustly. "This is going to make El Salvador the financial centre of the world."

The bond would be issued on the "liquid network", a bitcoin sidechain network.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 22, 2021, with the headline 'El Salvador floats plan to build world's first Bitcoin City'. Subscribe