El Salvador announces plans to build a 'Bitcoin city' at the foot of a volcano
President Nayib Bukele said the country will harness the geothermal energy from the volcano on which the city will be built to mine the Bitcoin required to fund the city
The president of El Salvador has announced plans to build a coin-shaped 'Bitcoin city' to be placed at the foot of a volcano.
President Nayib Bukele addressed gatherers at an event in Mizata on Saturday, announcing the plans to build the cryptocurrency-powered city in La Unión.
Bukele said the geothermal energy generated by the volcano will contribute towards powering the mining of the 300,000 Bitcoin (£12.8 billion) thought to be required to build the city.
The president said the city "will have everything" including restaurants and bars, museums, and high-speed travel infrastructure like rail and airports.
Bukele also said no income tax will be levied in the city, and that half of the value added tax (VAT) levied would be used to fund the bonds issued to build the city, while the other half would be used to fund public services like waste removal.
"If you want Bitcoin to spread over the world, we should build some Alexandrias," said Bukele, likening the idea to the cities founded by Alexander the Great.
El Salvador became the first country in the world to adopt Bitcoin as legal tender in September, alongside the US dollar.
The move was a controversial one, sparking violent protests across the country that led to a number Bitcoin ATMs, installed across the country as part of the initiative, being set on fire.
The financial logic behind the Bitcoin city is underpinned by the belief that the cryptocurrency's value is set to increase substantially.
The initial focus is on a 10-year plan that involves taking large sums of Bitcoin off the market and waiting for it to appreciate in value to partially fund the build.
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Samson Mow, chief strategy officer at Blockstream, said at the announcement event that he thinks Bitcoin can reach a $1 million (£743 million) valuation in five years.
El Salvador is also currently developing securities legislation that will facilitate a Bitcoin sidechain network, which will manage all the issued Bitcoin-backed bonds associated with the city's build.
The first bonds are expected to be issued with in 60 days, in early 2022, and the licence to manage the sidechain's exchange would go to cryptocurrency exchange Bitfinex.
"This is going to make El Salvador the financial centre of the world," said Mow.
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