EXPLAINED | Bitcoin City: What Is It? How Will It Benefit Citizens? Can You Invest?
Bitcoin City will offer bonds to investors around the world, for amounts as low as $100.
El Salvador President Nayib Bukele has revealed a model of his planned Bitcoin City. More of a cryptocurrency trading hub than an actual city, the Bitcoin City will be powered by volcanic geothermal energy and promises an array of tax exemptions to attract foreign investors. Bitcoin City will also have residential areas, malls, and even a port to make it feel like a residential zone. One of the few countries to have adopted Bitcoin as a legal tender, El Salvador aims to be a trendsetter when it comes to cryptocurrency adoption and usage.
On May 10, Bukele took to Twitter to share images of a scale model for his Bitcoin City. Bukele also tweeted that “El Salvador just bought the dip,” adding 500 more Bitcoins to its treasury. Bitcoin prices took a major plunge on May 10, dropping below $30,000 for the first time since July 2021. For a crypto-forward leader like Bukele, it made sense to buy the dip when the prices are low. Commenting on the latest purchase and Bukele's overall support for Bitcoin, Edul Patel, CEO and Co-Founder of crypto platform Mudrex, told ABP Live, "Given Bukele’s vision on BTC as a currency that would be widely used in El Salvador, averaging out at current prices is a progressive move."
El Salvador just bought the dip! 🇸🇻
— Nayib Bukele (@nayibbukele) May 9, 2022
500 coins at an average USD price of ~$30,744 🥳#Bitcoin
In this article, we take a detailed look at the upcoming Bitcoin City and everything it promises.
Bitcoin City: What is it?
In a nutshell, Bitcoin City will be a crypto trading hub. However, Bukele promised that there would also be residential areas, malls, restaurants, and a port. It will also have access to digital education, technology, and sustainable public transportation, as per the 40-year-old Salvadoran president.
Bitcoin City: What will it look like?
As per Bukele’s tweet, Bitcoin City will be marked by a gigantic Bitcoin logo in the central plaza, and the rest of the city will be built around it in a circular design, resembling a coin.
#Bitcoin City is coming along beautifully ❤️ pic.twitter.com/A6ay8aAREW
— Nayib Bukele (@nayibbukele) May 9, 2022
Bitcoin City: How will it be powered?
Bitcoin City will be powered by geothermal energy. It will be constructed near the Conchagua volcano on the Gulf of Fonseca, from where energy will be drawn to ensure sustainability.
Bitcoin City: How will it be funded?
El Salvador’s Bitcoin City will be funded with the issuance of a $1-billion Bitcoin bond. Managed by Bitcoin infrastructure firm Blockstream, half of the bond amount will be used to build crypto mining and energy infrastructure, while the remaining amount will be used by El Salvador to buy more Bitcoins.
Bitcoin City: Can you invest in Salvadoran Bitcoin bonds?
The prime idea behind Bitcoin City is to spread crypto awareness among the masses and also invite foreign funding. This can mainly be done via the tokenised bond offered by El Salvador. These bonds will be made available to users around the world, who can invest in amounts as low as $100.
As per Blockstream CMO Samson Mow who worked closely with the Salvadoran government on its Bitcoin strategy, “We believe this bond has the potential to accelerate hyperBitcoinisation and bring about a new financial system built on top of Bitcoin.” Mow said that following a five-year lock-up period of the bonds, El Salvador will start selling its crypto holdings “and pay an extra dividend to bondholders.” He added, “With an initial 6.5 percent yield, this could represent a significant windfall for the country if all goes well.”
Calling this a great move, Patel said that El Salvador could be a good option to look at for investors due to its low volatility. "This is a great move to grow Bitcoin City, as well as to organisations investing as volatility is lower here."
Bitcoin City: What taxes do residents have to pay?
As per Bukele, Bitcoin City residents won’t have to pay income taxes, property taxes, and capital gain taxes. Citizens will also be exempt from payroll taxes. Bukele’s simple message to those interested: “Invest here and earn all the money you want.”
The only taxes that Bitcoin City residents will have to pay are value-added taxes. Half of these taxes will be paid for municipal infrastructure and maintenance, while the other half will be utilised for municipal bond payments.
Patel believes that these moves will encourage people to adopt Bitcoin more. "All of these steps are being implemented in order to increase adoption. Hence, implementing these would encourage people to use Bitcoin as a currency," he said.
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