El Salvador has already proven to be a first mover by making bitcoin legal tender in the country. Not only that but the country has been accessing geothermal power from a volcano to power bitcoin mining, sending a signal to the rest of the world that securing transactions on the blockchain and creating new coins can be an environmentally friendly endeavor.
El Salvador President Nayib Bukele has set a model for other Latin American nations to emulate as the country has been buying the bitcoin dip and touting digital wallets. Now he is taking it a step further with the creation of a Bitcoin City that is not only crypto friendly but tax and environmentally friendly as well.
The city will be located in La Union, where it will harness the geothermal energy from a volcano. With the exception of a value added tax, the digital city will boast 0% taxes across income, capital gains, property, payroll, municipal and CO2 emissions. The digital city will comprise an airport, residences and businesses in addition to a bitcoin-centered plaza.
Prolly nothing. https://t.co/vbhuGg28PK
— Nayib Bukele 🇸🇻 (@nayibbukele) November 21, 2021
Financing for the city will come from bitcoin-backed bonds that the country plans to introduce in 2022, the first of which will be a 10-year $1 billion bitcoin-backed volcano bond with a 6.5% coupon attached, according to Samson Mow, chief strategy officer of blockchain tech company Blockstream. Mow announced the details at a bitcoin event.
El Salvador will direct 50% of the proceeds from this bond toward buying more bitcoin. With the bitcoin price currently hovering below the $60,000 threshold, they could do so at a bargain, except the bonds are expected to be issued for another 60 days or so.
In addition, there will be a five-year lockup after which time the country will unload some of the bitcoin to distribute yet another coupon to investors. Samson Mow predicts,
“This is going to make El Salvador the financial center of the world.”
— Miguel Vaquerano 🇸🇻 (@MigueVaquerano) November 21, 2021
At the same event, a casual looking President Bukele urged people to “invest here and make all the money you want.” He further stated,
“This is a fully ecological city that works and is energized by a volcano.”
El Salvador is not the only Latin American nation focused on bitcoin. Cuba recently announced plans to regulate the leading cryptocurrency, paving the way for BTC payments in the country. Argentina has announced a new 0.6% tax on on exchanges for crypto transactions. And Brazil is entertaining legislation that would see bitcoin used to pay employee wages.