In a first-of-its-kind move, El Salvador is planning the construction of a Bitcoin City to help people mine cryptocurrencies. Investments to build this city will come from Bitcoin bonds that the government plans to issue in the next 60 days, Reuters reported.
The central American country already made global headlines earlier this year, when it became the first nation to recognize Bitcoin as legal tender. Earlier this month, President Nayib Bukele declared that the country was building schools from the profits it had generated from Bitcoin so far. Amidst media reports about the hasty implementation of the cryptocurrency, the government has now unveiled another bold move, building an entire city using money generated with Bitcoin.
¡El Salvador será el primer país del mundo en tener una #BitcoinCity!— Casa Presidencial 🇸🇻 (@PresidenciaSV) November 21, 2021
Estará entre la ciudad de La Unión y Conchagua. Las personas podrán vivir en La Unión pero trabajar en la #BitcoinCity. Pronto empezarán a ver todos los beneficios, cuando el desarrollo y la inversión llegue. pic.twitter.com/21bx7Yc5aJ
The city envisioned to be shaped like a coin will have all the amenities like commercial and residential areas, airport, train stations, restaurants, entertainment centers that you would expect from a new city, an official press release said. Located between La Unión and Conchagua, the city will, however, be powered by a geothermal plant harvesting energy from a volcano near the Gulf Of Fonseca.
In the press release, President Nayib Bukele said that the region would have no income taxes, property taxes, zero municipal taxes, and zero CO2 emissions. The only tax applicable would be a value-added tax (VAT) that would be split in half. One half would be used to pay for running municipal services in the city while the other would be used to finance the bonds that will be used to raise money for building the city itself.
According to the plans unveiled by the government, El Salvador will issue $1 billion worth of bonds by early next year. Half of the amount will be used to construct the city and infrastructure while the other half will be used to buy more Bitcoin. After a lock-in period of about five years, El-Salvador will begin to divest its Bitcoin holdings, at prevalent market rates, which are estimated to be higher than what they are now, helping the government make windfall profits, Reuters reported.
The country plans to issue several more bonds like this over the next few years. However, it first needs to address a few laws in the parliament and even set up a Bitcoin exchange in the country to facilitate this move, Reuters reported.
Although Bukele has not provided a timeline for the city project, there is a massive assumption that the value of Bitcoin will be significantly higher a decade from now. The cryptocurrency has seen high volatility since its inception and its valuation in the future is subject to a lot of market factors.