The 40-year-old right-wing president of El Salvador, Nayib Bukele, is once again betting on bitcoin to propel the country forward. His dubious plan is, essentially, to build a “Bitcoin City” powered by geothermal energy from a volcano to help raise the cryptocurrency’s profile and encourage its widespread use.
Bukele said on Saturday that the country’s so-called Bitcoin City will be built in La Union, a region in the eastern part of El Salvador. Reuters reports that the city will not levy any taxes except a value-added tax, or VAT, and feature a central plaza that will look like a bitcoin symbol from above. In addition, Bitcoin City will be circular and include an airport as well as residential and commercial areas.
It will, naturally, be a place for bitcoin mining, an energy-intensive task that will be facilitated by the Conchagua Volcano, the El Salvadorian government said in a news release. Conchagua consists of two overlapping stratovolcanoes and overlooks the Gulf of Fonseca.
Bukele revealed his plans for Bitcoin City in remarks at an event following a week of promotion of bitcoin in El Salvador, which became the first country to recognise bitcoin as a national currency in September.
“Invest here and make all the money you want,” Bukele said. “This is a fully ecological city that works and is energised by a volcano.”
At the event, experts explained that the country would issue $US1 ($1) billion in “bitcoin bonds” in 2022 to raise funds to build Bitcoin City. The bonds will be issued on the liquid network, a bitcoin sidechain network, and carry a nominal yield of 6.5%.
Blockstream, which manages the liquid network, said that $US500 ($691) million of the funds raised will be dedicated to infrastructure for the city and bitcoin mining in the region. The other $US500 ($691) million will be used to buy more bitcoin.
It’s hard to imagine that the citizens of El Salvador, one of the poorest countries in Latin America, will be as excited for Bitcoin City as Bukele or his bitcoin posse. The digital currency’s rollout was accompanied by glitches, which fuelled protests against the government, and polls have found that citizens are wary of their president’s passion for bitcoin.
At the end of the day, the people of El Salvador would certainly see more benefits if their president focused more on changing and improving their lives instead of fixating on an extremely volatile digital currency. The odds don’t look good, though.