- El Salvador’s president announced a plan for a completely Bitcoin (BTC) based city.
- The city is intended to be a tax-free and no levies will be charged, except charging a value-added tax (VAT).
- All financial transactions in this city can be done using Bitcoin.
- The funding for the city will also be conducted using Bitcoin bonds.
A decade back, cryptocurrency funding a city might be unimaginable, but it is becoming a reality. The president of El Salvador, Nayib Bukele, recently announced the project for developing a “Bitcoin City.” During the Latin American Bitcoin and Blockchain Conference, he made this known and further noted that the city will be entirely financed and run using Bitcoin.
The ‘Bitcoin City’ plan
Bukele revealed the city would be powered by geothermal energy from the Conchagua volcano. This energy will also be used in the mining of cryptocurrency. In addition to this volcano, an additional source of power will be the Tecapa volcano’s thermal plant. What makes this announcement an attraction for many is the 0% CO2 emissions, as the power sources won’t cause any harm to the environment.
In addition to that, Bitcoin City will be tax-free except for a value-added tax (VAT). Hence, the citizens won’t have to face tax-related problems in this modern crypto-based city.
The Bitcoin funds planned for this project will be managed by a blockchain tech provider firm, Blockstream. The project’s strategy officer, Samson Mow, said that $1 billion bonds would be used initially for this project. El Salvador’s government intends to start issuing these bonds in 2022. Once these bonds are issued, El Salvador’s government will invest half of it into Bitcoin, while the remaining half will develop the city’s infrastructure.
The concept is to provide all necessities that a traditional city has. These include residential areas, commercial blocks, health facilities, educational institutes, entertainment areas, etc. It will be a perfect example of a modern city that is not only based on Bitcoin but will also be used in developing it. The central building of the city will resemble Bitcoin’s shape.
Though the project has been announced and the bonds will be issued soon, El Salvador’s government has not issued any specific timeline to start the construction of the Bitcoin city. However, the location of the prospective city has been specified, which is reportedly the La Unión region.
This project has attracted interested investors because of the perks that it promises. The city is estimated to cost about BTC 300,000 for construction. The additional dividend from investment in Bitcoin, other than those spent on construction, will be divided amongst the investors.
Legal status of Bitcoin in El Salvador
El Salvador is the very first country in the world to recognize BTC as a currency legally. Before accepting Bitcoin as legal tender, El Salvadorans were already using the US dollar for two decades.
As a result of the legal recognition of BTC in El Salvador, the government has taken a step further to benefit from the growth of Bitcoin. As it is projected that the worth of Bitcoin will cross US$1 million in a decade, it will bring massive benefits to the investors. If the Bitcoin City project succeeds, El Salvador will likely become the center of the world’s Bitcoin market.
El Salvador’s government has worked on the promotion of digital currency. It has issued digital wallets to its citizens, which can be used for the purchase of items.
A new future – Bitcoin-based economy
The establishment of the Bitcoin City could mark the start of a new era of an economy based on Bitcoin. Other counties are likely to follow the example, moving to smart cities. It will also help with the growth of Bitcoin, which has been on the uptrend since this year.
The world has already been struggling to make it a reality. El Salvador’s president has taken this huge step, setting an example for other states. Though it might take time for complete success, it will be a move changing the traditional concept of the economy.
Despite the prospects that this project brings with it, it is expected that it will cause protests. It is because of the inflation and instability that it might get into the country. This project promises to bring new jobs to the market, but the El Salvadorian public still seems divided over this issue.
Though the prospects of this project are fifty-fifty because of fluctuations in BTC’s value, it will open up new opportunities for digital investments.
The Bitcoin City will bring enormous changes to the state-level economy and is considered a breakthrough. Though yet in the planning phase, it will have huge impacts on the future of crypto investments. It will also determine the trust of investors in these like projects. Considered a giant step, it will decide the fate of El Salvador because of the massive investments.
Like all good motivations and inspirations, some things can go south. Recently the president of El Salvador Nayib Bukele was attacked by the Ethereum creator, who believes that his move to adopt cryptocurrencies was accelerated. Vitalik Buterin, the ETH creator, also branded Bukele and his followers as extremists.
This tactic of pushing BTC to millions of people in El Salvador at the same time with almost no attempt at prior education is reckless and risks a large number of innocent people getting hacked or scammed. Shame on everyone (ok, fine, I’ll call out the main people responsible: shame on Bitcoin maximalists) who are uncritically praising him.Vitalik Buterin, Ethereum Co-Founder, Reddit forum
Bukele’s actions will be tied to crypto somehow and would definitely bring a bad name to crypto and its community, don’t you think so? Please tell us in your comments below.