El Salvador To Establish The First Bitcoin City Backed By BTC Bonds

El Salvador intends to develop the world’s first “Bitcoin City,” backed initially by Bitcoin-backed bonds, since becoming the world’s first country to accept bitcoins as legal currency in the counter, President Nayib Bukele declares, reiterating his commitment to use cryptocurrency to stimulate investment in the Central American nation.

El Salvador remains at the forefront of Bitcoin acceptance, with President Nayib Bukele announcing the launch of Bitcoin City, which will be funded initially with $1 billion in Bitcoin bonds.

El Salvador President Nayib Bukele stated on Saturday at a conference to promote bitcoin that they’ll begin funding in 2022; the bonds will be accessible in 2022. Bukele went on to say that the city being built in the country’s east would derive its electricity from a volcano and would not collect any taxes other than the Value Added Tax (VAT).

Bitcoin City will be built with the strong collaboration of well-known cryptocurrency companies including Adam Back’s Blockstream and Bitfinex. According to Bitfinex Chief Technology Officer Paolo Ardoino, the platform will assist El Salvador’s Bitcoin City project by establishing a securities facility to hold the Bitcoin bonds.

According to Ardoino, the platform would ultimately include a number of domestic and foreign digital asset services, as well as the creation of new digital asset rules for the country.

Bitcoin City, according to the president, will be a fully functional city with residential sections, shopping malls, restaurants, a port, and “all-around Bitcoin.” Moreover, according to Bukele, property owners will only be subordinate to value-added tax (VAT) that will be used to pay the municipality’s bonds, with the remaining proceeding to public amenities and city maintenance.

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Liquid Network

The first 10-year issuance dubbed the “volcano bond,” will be worth $1 billion, backed by Bitcoin, and have a 6.5 percent coupon, according to Samson Mow, chief strategy officer of blockchain technology provider Blockstream. 50 percent of the funds would be spent to buy Bitcoin on the public markets, he said. Other bonds would inevitably follow.

El Salvador will begin selling some of the Bitcoin used to fund the bond after a five-year lock-up period to provide investors with an “additional coupon,” according to Mow, who thinks that the cryptocurrency’s worth will keep rising strongly. This will turn El Salvador into the world’s financial hub, Mow said.

The bond would be released on a Bitcoin sidechain network known as the “liquid network.” El Salvador’s authorities are working on a securities law to help with the procedure, and Bitfinex will be given the initial licence to function an exchange, according to Mow.

On a presentation behind Mow, the crypto exchange Bitfinex was mentioned as the bond’s book runner. Mow asserts that if ten of these bonds are issued, $5 billion in Bitcoin will be removed from the market for a number of years.

“If 10 more authorities issue these bonds, you’ve got half the market capitalization of Bitcoin straight there.”

While arguing that the “game theory” on the bonds offered first bidder El Salvador a benefit Mow claimed, Bitcoin at the five-year point will reach $1 million, and then El Salvador will trade Bitcoin in two quarters and recover that $500 million.