El Salvador to build cryptocurrency-fuelled ‘Bitcoin City’
In a rock concert-like atmosphere, El Salvador President Nayib Bukele announced that his government will build an oceanside ‘Bitcoin City’ at the base of a volcano.
Bukele used a gathering of bitcoin enthusiasts on November 20 to launch his latest idea, much as he used an earlier bitcoin conference in Miami to announce in a video message that El Salvador would be the first country to make the cryptocurrency legal tender.
A bond offering would happen in 2022 entirely in bitcoin, Bukele said, wearing his signature backwards baseball cap. And 60 days after financing was ready, construction would begin.
The city will be built near the Conchagua volcano to take advantage of geothermal energy to power both the city and bitcoin mining – the energy-intensive solving of complex mathematical calculations day and night to verify currency transactions.
The government is already running a pilot bitcoin mining venture at another geothermal power plant beside the Tecapa volcano.
The oceanside Conchagua volcano sits in southeastern El Salvador on the Gulf of Fonseca.
The government will provide land and infrastructure and work to attract investors.
The only tax collected there will be the value-added tax, half of which will be used to pay the municipal bonds and the rest for municipal infrastructure and maintenance. Bukele said there would be no property, income or municipal taxes and the city would have zero carbon dioxide emissions.
The city would be built with attracting foreign investment in mind. There would be residential areas, malls, restaurants and a port, Bukele said. The president talked of digital education, technology and sustainable public transportation.
“Invest here and earn all the money you want,” Bukele told the cheering crowd in English at the closing of the Latin American Bitcoin and Blockchain Conference being held in El Salvador.
Bitcoin has been legal tender alongside the US dollar since September 7.
The government is backing bitcoin with a US$150-million fund. To incentivise Salvadorans to use it, the government offered US$30 worth of credit to those using its digital wallet.
Critics have warned that the currency’s lack of transparency could attract increased criminal activity to the country and that the digital currency’s wild swings in value would pose a risk to those holding it.
Bitcoin was originally created to operate outside government controlled financial systems and Bukele says it will help attract foreign investment to El Salvador and make it cheaper for Salvadorans living abroad to send money home to their families.
Concern among the Salvadoran opposition and outside observers has grown this year as Bukele has moved to consolidate power.
Voters gave the highly popular president’s party control of the congress earlier this year. The new lawmakers immediately replaced the members of the constitutional chamber of the Supreme Court and the attorney general, leaving Bukele’s party firmly in control of the other branches of government.
The United States government, in response, said it would shift its aid away from government agencies to civil society organisations. This month, Bukele sent a proposal to congress that would require organisations receiving foreign funding to register as foreign agents.