El Salvador continues its lofty bitcoin dreams as President Nayib Bukele recently announced that the country plans on building a Bitcoin city at the foot of the Conchagua volcano using the money earned from the cryptocurrency.
The yet-to-be-named city will be located in the southeast region of La Unión, a municipality in El Salvador, and will take full advantage of geothermal energy to power Bitcoin mining. And it’s going to be built as a giant circular city to represent the shape of a coin.
Everything You Want in a Bitcoin City
The big announcement was made at a Bitcoin promotion event in the city of Mizata on November 20. President Bukele promised a lot as he tried to hype up the crowd and get them excited about the Bitcoin city. He said that the new city will include everything a city typically wants and needs: residential areas, commercial areas, an airport, entertainment, bars, a port; everything devoted to Bitcoin.
¡El Salvador será el primer país del mundo en tener una #BitcoinCity!
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
— Casa Presidencial 🇸🇻 (@PresidenciaSV) November 21, 2021
And best of all for Salvadorans, income tax, payroll tax, and capital gains tax will not be levied in the city, only value-added tax.
Value-added tax or VAT is a tax that is collected on a product during every stage of its production. The money taken out depends on the cost of the product minus the cost of materials during production. It’s unclear what production he’s referring to, but presumably, he’s referring to Bitcoin mining. President Bukele said that half of the money will be used to improve the city while the other half will keep the streets clean.
Singapore of Latin America
To kick things off, El Salvador plans to use $1 billion US in 10-year bonds to pay for the initial construction of the Bitcoin city. Half of these “volcano bonds” will be converted into Bitcoin while the other half will be used for infrastructure and bitcoin mining to be powered by geothermal energy.
During the event, it was projected that Bitcoin will hit $1 million US per token in the next five years and have an annual percentage yield of 146 percent. This is all an attempt to bring in investors from around the world to buy into this dream city.
The plan is to make El Salvador “the financial center of the world” and “the Singapore of Latin America.”
This is, without a doubt, a gigantic gamble by El Salvador. The country’s 2020 GDP was a middling $24.6 billion. To put into perspective how small that is, Bill Gates, who is not the richest man in the world, is worth $124 billion. The Bukele administration is banking on Bitcoin to cause economic growth and to keep shooting to the moon.
#ElSalvador is experiencing a wave of tourists that a year ago wouldn’t have dreamed of visiting (and couldn’t find it on a map). They came because of #Bitcoin. They will come back with their friends 4 the beautiful beaches, great food & most importantly the friendly people!
— Bitcoin Beach (@Bitcoinbeach) November 23, 2021
But as we all know, cryptocurrency goes up and down more often a rollercoaster; there’s a lot of money to make, but also a lot to lose. This Bitcoin city idea puts into question how much of this investment will go to the people of El Salvador.
The whole event was in English in a country where the majority of the people speak Spanish and the text incentives are an obvious ploy to attract foreign investors. I can’t help but be skeptical as to whether this Bitcoin experiment will even work.