El Salvador To Create "Bitcoin City"
El Salvador's president, Nayib Bukele, recently announced that his country would be constructing Bitcoin City. An entire metropolis with, as Bukele stated, "residential areas, commercial areas, services," etc., based around crypto! Having been the only country to make bitcoin legal tender, this is consistent with the country's bullish position towards digital assets.
The city, to be constructed in the shape of a coin and at the base of a volcano, will have zero property, capital gains, payroll, or income taxes.! The reason for the location is to harness the volcano's geothermal energy.
Bukele also mentioned that El Salvador would issue a 1 billion U.S. "bitcoin bond," a financial instrument created by Blockstream (A company that builds financial infrastructure on the Bitcoin Blockchain). Blockstream plans to utilize their Liquid Network (A platform made to improve the digital asset settlement process). "Of that amount, $500 million will be used to help construct needed energy and bitcoin mining infrastructure and $500 million to buy even more bitcoin. At the cryptocurrency's recent trading price of about $59,000, that would bring the country's treasury stash to just under 2,000 bitcoins." (CoinDesk)
Blockstream's Chief Strategy Officer, Samson Mow, said that the bond would be U.S. dollar-denominated over ten years and initially pay 6.5%. Blockstream estimates that in 10 years, the annual percentage yield will be 146%, Mow stated, based on Blockstream's bitcoin price projections of $1 million per bitcoin in 5 years.
My initial reaction was that this sounded pretty wacky and that maybe El Salvador is just trying to create more positive news around crypto and their country's prospects. Ultimately, the grand plan comes down to execution. The zero property, capital gains, payroll, or income tax incentive should be very helpful in bringing wealth and prosperity to the country and new city. As I see it, the project could go two different ways. Either in 5 to 10 years, we are talking about how silly it was to construct a city around a digital currency, or we will praise Nayib Bukele for his, at this time ballsy, move and how he has lifted his country to new and inspiring heights. Only time will tell.