El Salvador, the first country to adopt Bitcoin as a legal tender, is already well known and liked by most Bitcoiners. Led by President Nayib Bukele, the country has a tendency for revealing news when people are least expecting it.
On 15 November 2021, El Salvador kicked off its first ever Bitcoin Week, full of Bitcoin Q&A sessions, seminars and get-togethers. A flood of people from all different backgrounds and cultures descended on the Central American country. They all had one thing in common – their love of Bitcoin.
This was the perfect opportunity for the outside world to finally get a taste of what living on a Bitcoin Standard was like. And it didn’t disappoint.
While it was a big week of even bigger ideas, it was the final day that made this particular week one to remember.
Dressed in all white with his hat set backwards, President Bukele announced that El Salvador has plants to build Bitcoin City.
Let’s Breakdown Bitcoin City
Bitcoin City is the name for a brand new city to be built in southeastern El Salvador, near the Conchagua Volcano. Bitcoin will be used to fund the city’s construction, and eventually used as the currency of choice within the city itself. This idea is enticing to international investors, who, Bukele hopes, will spend time and money within El Salvador. Bukele said he wants to make El Salvador the “Singapore of Central America”. He wants his citizens to be able to experience a country that is rising on the global stage.
The vision for Bitcoin City will have all the comforts one would expect from a modern city, including an airport, shipping port, train station, entertainment venues and more. Bukele is hoping the city’s public infrastructure will be worth over 300,000 BTC ($17 billion USD at the time of writing). Major focuses are the development of public transport and the energy sector, as well as education; both digital and technological.
Perhaps, the most ambitious plan is to make the Bitcoin logo visible from the air by including it in the city’s design – making it, well and truly, a Bitcoin City. According to the latest reports, construction is set to commence sometime in 2022, 60-days after the funding is raised through the sale of Bitcoin bonds.
The city’s promise of abundant financial freedoms the citizens will experience is a big talking point amongst prospective inhabitants. Bitcoin City aims to allow individuals to make the most of their wealth by removing many of the traditional taxes we’re so familiar with, including:
- 0% property tax
- 0% income tax
- 0% capital gains tax
- 0% payroll tax
- 0% municipal taxes
The only tax citizens will be subjected to is a 10% value-added tax (or GST).
A Breakdown of Bitcoin Bonds
Without taxes, it might seem like the city has a significant funding problem. This is solved by a series of bonds set to be released by the El Salvadoran government using the Bitcoin Liquid Network.
Developed by Blockstream, Bitcoin’s side-chain liquid network will allow small investments to be captured and pay out dividends quicker. The issuer of the bonds will be the Republic of El Salvador and Bitfinex Securities will act as the book-runner. The first bond to be issued will be called the “Volcano Bond” and is hoped to attract $1 billion USD to go towards funding the construction of the city.
The funding raised by the bond will be split accordingly:
- $500 million into direct allocation of Bitcoin.
- $500 million into the city’s infrastructure such as the development of Bitcoin mining facilities.
This 10 year Bitcoin bond will pay a coupon (annual interest) of 6.5% to the initial investors. A special dividend will also be added (after 5 years) which is 50% of the Bitcoin gains, paid out by the selling of the Bitcoin initially purchased by the bond. This Bitcoin will be placed in cold-storage for five years and then let back onto the market once it has appreciated over the subsequent period.
$500 million worth of Bitcoin is about to be taken off the market! Better stack sats!
Nearly everyone can get involved too; the minimum subscription amount is $100 USD. Although, if you want to gain citizenship by investing in the Bitcoin bonds you’ll need to invest a bit more. $100,000 will get you to the citizenship application, but you’ll have to wait until five years after the bond has been issued to receive your citizenship.