El Salvador, the first country to use Bitcoin as legal tender, plans to construct a “Bitcoin City” with the popular cryptocurrency used to fund the project.
The city will be built near Conchagua volcano in the south-eastern region of La Unión and will be circular to represent the shape of a coin, the country’s President Nayib Bukele announced during the Latin American Bitcoin and Blockchain Conference on Saturday.
The new city would get geothermal power from a volcano and include everything: residential areas, commercial areas, services, museums, entertainment, bars, restaurants, airport, port, rail – everything devoted to Bitcoin, according to Bukele.
Construction will begin in 2022 and the city will be exempt from taxes apart from the value added tax (VAT).
To fund the project, the Central American country, will issue $1 billion “bitcoin bonds” in 2022. The $1 billion USD will be split between a $500M allocation in bitcoin (BTC) and a $500M spend for building out energy and Bitcoin mining infrastructure in the region, the government said.
Mining Bitcoin is the process by which new bitcoin is created using sophisticated computers that solve complex mathematical problems. It is costly, difficult and takes up large amounts of energy.
The issuance of these bonds will be managed by Blockstream, a digital assets infrastructure company.
The tokenised US-dollar denominated 10-year bonds will be available to a number of users in the world that will have access to invest in small amounts as low as $100 dollars. Dividends will be paid easily to bondholders using tools deployed on top of the Liquid network, a sidechain-based settlement network for traders and exchanges, enabling faster, more confidential Bitcoin transactions and the issuance of digital assets. The country also plans to create a government securities law and grant a license to Bitfinex Securities to process the bond issuance.
“We are excited to work with Blockstream and build the foundation of the financial infrastructure for the future on the Liquid Network. This is a powerful first step for El Salvador in becoming a global hub for digital capital markets,” said President Nayib Bukele. “Our long-term commitment is to explore and develop a domestic platform to help facilitate the growth of our digital asset industry.”
Opinion polls show Salvadorans are skeptical about Bukele’s love of bitcoin, and its introduction in September sparked protests across the country.
At the time, the government released a digital wallet app known as the Chivo wallet, giving away $30 in Bitcoin to every citizen who downloaded it but users had to be disconnected due to technical glitches.
More than 200 new cash machines were also installed across the country. One was set on fire during a protest. Others don’t work well, various media outlets reported.
Businesses were compelled to accept bitcoin as payment, wherever possible, but even some government offices were refusing to accept Bitcoin as payment.
“Bitcoin is a law that benefits only wealthy businesspeople,” said one protestor, according to Fortune.
Around 32.7% of El Salvador’s population remains below the poverty line and only 58% have access to the internet, which is necessary for bitcoin transactions.
Bitcoin (BTC-USD), a controversial currency in part because its value can fluctuate significantly, was down by more than 2.05% on Monday morning, trading at $57,467.