Bitcoin City is the creation of El Salvador, the first country in the world that adopt Bitcoin as legal tender. It’s one of the many doings of President Nayib Bukele, who wanted to transform El Salvador into a global technology hub that would attract millions of investors. In fact, you can actually become a citizen if you donate one million dollars in Bitcoin or Tether to the government, and you’ll also become a direct contributor to the country’s development.
Before reaching fame for its Bitcoin adoption, El Salvador was a small and developing country facing underemployment and high inflation challenges. Now, after almost two years of adoption, things haven’t changed much, but you can buy Bitcoin with bank transfer, make purchases with Bitcoin at local businesses and use it as you like with a proper legal framework.
The country continuously seeks improvement and innovation, which is why the first quarter of 2024 will bring the Volcano Bonds into the government to support new capital markets. Here’s what this means.
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What’s the deal with Bitcoin City?
Volcano Bonds include digital debt instruments that will be leveraged to create the Bitcoin City. The location for this technological hub is already established near the Conchagua volcano and is powered by its geothermal energy. The city will have the shape of a Bitcoin designed by
Fernando Romero, a Mexican architect, will be built on the Gulf of Fonseca.
The president wants the city to be surrounded by trees and the sea, offering a beautiful view of the nearby volcano. While these features will make an excellent deal for the country’s tourism, the city will also be functional for its citizens, providing an airport, residential areas, shops and a central plaza.
Why are Volcano Bonds needed?
Volcano bonds will be used as the primary instrument to create the Bitcoin City, and a $10 billion bond is expected to be needed to end the project. For now, it’s not sure when the city will be constructed and officialized, but the bonds will be delivered at the beginning of 2024. That’s because recently, they’ve been approved in El Salvador by the Digital Assets Commission (CNAD). The Bitcoin Office director also forecasts the bond offer’s size might reach one billion dollars. The company that will handle the issuance next year is Bitfinex Securities through the
Blockstream Liquid network. The company has been working on the project for a year now.
Bukele has been talking about these bonds since 2021. Still, due to a lack of proper regulations for digital securities, he had to delay the idea until recently, when cryptocurrency became more acknowledged, and Bitcoin settled in El Salvador.
Why does Bukele want to build a Bitcoin City?
The Bitcoin City should be the key to attracting more investors and tourists in El Salvador, as well as funds under the form of Bitcoin that would help the country overcome the debt that followed the Bitcoin adoption. The $117.5 million Bitcoin investment was controversial for citizens and global experts, who saw this activity as a risk for the country.
The International Monetary Fund (IMF) even considered that El Salvador needs to end the financial activity through Bitcoin as legal tender since crypto prices would plunge worldwide, therefore negatively impacting its economy. El Salvador is already indebted, and the citizens are not using Bitcoin for payments or sending money overseas.
However, we can understand this drastic change, as the country faced an irrevocably economy fall in 2021, and nothing seemed to be working to make it get back on track. So, the last resort of the Bukele president was to approach a different strategy and make Bitcoin legal tender, believing this would bring more resources into the country.
This is just the beginning
The world didn’t know that Bukele developed a thorough plan that included numerous methods of replenishing the country’s economy. For instance, El Salvador could become more economically independent in the future through bond buyback programs that can expand the tax base and lower the country’s debt.
This way of exchange might bring back citizens who left the country and open its gates to immigration, therefore gathering more purchasing power. At the moment, there’s a positive return on the country’s BTC investment portfolio, so the president has high hopes that the project will eventually turn towards greater profits.
Moreover, it’s expected that Argentina will also borrow Bitcoin since there are numerous citizens without proper banking systems there and would benefit from the use of digital assets. Due to all-time high inflation here, this is most likely to happen.
Salvadorean citizenship with a small investment
One of the many ways Bukele tries to have more people enter the country and invest in its greatness is to offer complete citizenship to anyone willing to donate $1 million in Bitcoin or Tether after Bukele decided to collaborate with the crypto company. The Freedom Visa is made for people wanting to become private investors in the country’s development, but it’s limited to 1,000 people annually.
Various sectors in El Salvador will benefit from these investments, from cultural enrichment to social programs, therefore contributing to the economic growth of El Salvador. Those interested need to pay a deposit of $999; if they get approved, the rest of the investment must be provided.
For now, the government states that there are hundreds of applications for the Freedom Visa.
There’s been a lot of controversy around Visa since countries offering considerably more powerful Visas provide competitive prices starting at $100,000. In contrast, El Salvador doesn’t deliver similar visa-free services globally.
Bitcoin City is slowly becoming more than a dream since the Salvadorean Volcano Bonds are set to be issued in the first quarter of 2024. These bonds will help gather resources for its development and construction, which hasn’t been announced yet. The Bitcoin City will be packed with resident areas and even an airport and is going to develop the country by putting it on the world map as the first that made such vital investments in Bitcoin.