Following his recent millionaire bitcoin purchase, El Salvador President Nayib Bukele posted about Bitcoin City, an idea that could eventually become the world’s main financial hub centered around Bitcoin. Although he showed the world some very futuristic renderings of what the city would look like, it is unclear whether they are already definitive or just ideas being shared with investors. One thing that is clear is that this is turning out to be a place that will appeal to many and that has already been heavily shared across social media.
Bukele, who spearheaded the push for El Salvador to become the first country in the world to adopt Bitcoin as legal tender last year, posted images of a gold-scale model and an artistic rendering of a city built on Twitter. Based on the model, the city will have a giant Bitcoin symbol in the main square of the town. He said that the city will be very green and futuristic.
Bitcoin city represents an interesting opportunity for both the crypto market and the economy of El Salvador. But the question is: why should a city be named after Bitcoin? The idea for Bitcoin city is that it should be a place where no capital gain taxes are imposed and where a variety of benefits to Bitcoin-themed businesses and professionals are offered. Furthermore, it will rely on geothermal energy, which the country is rich in, to mine Bitcoin and benefit the local economy. The ambition is therefore to turn an uninhabited area at the base of Conchagua into the Bitcoin capital of the world.
Earlier this year, the country announced there would be a bit of delay in issuing its famous Bitcoin bonds which, among other things, should also finance the development of the megacity dedicated to Bitcoin. The delay apparently occurred due to internal problems in the country and to the economic outlook on the global markets—which does not seem to be any calmer today.
These bonds would basically work like any other bond: the country issues debt and investors purchase it in exchange for some yield. The big difference with traditional bonds is what the country currently plans to do with the liquidity from investors. According to the plans, half of the money should be used to buy Bitcoin on the open market, while the rest should go into building Bitcoin City.
The issuance of the Bitcoin bonds remains one of the biggest question marks about this project, which could bring a large number of investors given the hype that is generating. Bukele insists that Bitcoin and Bitcoin City are El Salvador’s future. In the midst of this week’s cryptocurrency market crash, the president proudly tweeted that he was “buying the drop” to get some bitcoins at a discount.
If the country manages to attract businesses (such as mining companies) and investors to its territory, this has the potential to turn El Salvador into a flourishing economy projected into the future. At the same time, the high volatility of the crypto market and the uncertainty surrounding the global economy might play against Bukele’s strategy, since investors may not want to be exposed to such high levels of risk and continue operating in more reliable jurisdictions such as the US.