Speaking at an event in El Salvador kicking off a week-long promotion of bitcoin, Bukele said the planned city in the eastern region of La Union would get geothermal energy from the volcano and no value-added tax (VAT) except. Tax will not be levied.
“Invest here and make as much money as you want,” said Bukele in English, dressed all white and wearing a reversed baseball cap, at the beach resort of Mizata. “It’s a completely ecological city that works and is activated by a volcano.”
Half of the VAT imposed will be used to fund bonds issued for the construction of the city, and the other half will pay for services such as garbage collection, Bukele said, estimating the public infrastructure will be around 300,000 bitcoins. There will be expenses.
Although Bukele is a popular president, opinion polls show Salvadorans are skeptical about their love of bitcoin, and its bumpy introduction has fueled protests against the government.
Comparing his plan to the cities founded by Alexander the Great, Bukele stated that Bitcoin City would be circular with an airport, residential and commercial areas, and a central plaza designed to look like a bitcoin symbol from the air. Will happen.
“If you want bitcoin to spread around the world, we must build some Alexandria,” said 40-year-old Bukele, who in September declared himself the “tyrant” of El Salvador on Twitter.
El Salvador plans to issue an initial bond in 2022, Bukele said, suggesting it will happen in 60 days’ time.
Samson Moe, chief strategy officer at blockchain technology provider Blockstream, told the gathering that the first 10-year issue, known as a “volcano bond,” will be worth $1 billion, backed by bitcoin and with a coupon of 6.5%. He said half the amount would go into buying bitcoin in the market. Other bonds will follow.
After a five-year lock-up, El Salvador will begin selling some of the bitcoin used to fund the bonds to offer investors “extra coupons,” assuming the cryptocurrency’s value will continue to rise strongly.
“It’s going to make El Salvador the financial center of the world,” he said.
The bonds will be issued on the “Liquid Network”, a bitcoin sidechain network. To facilitate the process, El Salvador’s government is working on a securities law, and the first license to operate the exchange will go to Bitfinex, Mo said.
Crypto exchange Bitfinex was listed as the book runner for the bond on a presentation behind Moe.
Once 10 such bonds are issued, $5 billion in bitcoin will be taken off the market for several years, Mo said. “And if you get 10 more countries to bond these, that’s half the market cap of bitcoin.”
The “game theory” on Bond gave the first issuer El Salvador an advantage, with Moe arguing, “If bitcoin reaches $1 million at the five-year mark, which I think it will be, they will be in two quarters.” Will sell bitcoins and make up for $500 million.”
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