The President of El Salvador has announced an ambitious plan to build a so-called “Bitcoin City” in which cryptocurrency will be the only legal tender.
President Nayib Bukele made the announcement on Saturday evening, saying the new city would be fully fledged. The city will include residential and commercial areas, restaurants, an airport, port and rail service, Coindesk reported on Saturday.
The city will be located near the Conchagua volcano (photo), a stratovolcano located in the La Unión department in El Salvador. The choice of the volcano is the key to the plan. While there are no confirmed historical eruptions from Colchagua, there is geothermal activity beneath the volcano and this will be exploited to fuel bitcoin mining in the new town.
To help the bitcoin city take off, Bukele also pledged that the proposed city would not be subject to capital gains, income taxes or wages, but only value added tax. A 13% VAT in El Salvador, known locally as Impuesto al Valor Agregado, is charged on goods and services.
Bukele did not specify a timetable for the city’s development.
In addition to announcing the new city, Bukele also unveiled a billion dollar “bitcoin bond”, a token financial instrument developed by Blockstream Corp. Inc. and hosted on the liquid network. The $ 500 million raised through the bond will be used to build energy and bitcoin mining infrastructure, while the remaining $ 500 million will be used to buy more bitcoin.
El Salvador aims to create a new government security law and license Bitfinex Securities to process bond issuance, according to a blog post published today by Blockstream. It could also pave the way for other Liquid security tokens such as the Blockstream Mining Note or the Exordium token to be listed on a regulated stock exchange in El Salvador.
The announcement of a bitcoin city is new, but El Salvador’s adoption of bitcoin is not. The country became the first in the world to accept bitcoin as legal tender in September. Bukele said at the time that legalizing bitcoin would boost investment in the country and help the 70% of Salvadorans who do not have access to traditional financial services.
In June, Bukele also pledged that El Salvador would offer “very cheap, 100% clean, 100% renewable and zero emission energy from our volcanoes” for bitcoin mining.