El Salvador to build crypto-fuelled ‘Bitcoin City’

Nayib Bukele’s announcement comes just two months after cryptocurrency was adopted as legal tender in the country

El Salvdor President Nayib Bukele presents his vision for Bitcoin City at the Latin American Bitcoin and Blockchain Conference on Saturday, 20 November, 2021 (AP)

The president of El Salvador has announced plans to build a ‘Bitcoin City’ at the base of volcano, whose geothermal energy is used to mine the cryptocurrency.

President Nayib Bukele presented his vision for Btcoin City at the Latin American Bitcoin and Blockchain Conference over the weekend,

It comes just over two months after the Central American country became the first country in the world to formally adopt bitcoin as a legal form of tender.

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In a rock concert-like atmosphere, Bukele said a bond offering would happen in 2022 entirely in bitcoin, 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.

The government is backing bitcoin with a $150 million fund. To incentivize Salvadorans to use it, the government offered $30 worth of credit to those who use its digital wallet.

Bitcoin was originally created to operate outside government controlled financial systems and Bukele says it will help attract foreign investment to El Salvador.

Critics have warned that the digital currency’s wild swings in value could pose a risk to those holding it, though BTC price increases against the US dollar since it was introduced as legal tender on 7 September mean it has already proved its worth as a hedge against inflation.

It also reduces the country’s reliance on the US dollar as a reserve currency, as well as significantly reduces remittance fees, which forms a large part of El Salvador’s economy.

Additional reporting from agencies.