At the end of the week-long Bitcoin promotion in El Salvador, Bukele stated that the city plans to be located in the eastern region of La Union and will obtain geothermal energy from the volcano, and will not levy any taxes except for value-added tax (VAT).
“Invest here and make all the money you want,” Booker said in English at the Mizuo Beach Resort, wearing a white shirt and a baseball cap. “This is a completely ecological city, inspired and operated by volcanoes.”
Bukele said that half of the value-added tax collected will be used to fund bonds issued for the construction of the city, and the other half will be used to pay for services such as garbage collection. It is estimated that public infrastructure will cost about 300,000 bitcoins.
Although Bukele is a popular president, public opinion polls show that Salvadorans are skeptical of his love for Bitcoin, and the launch of Bitcoin has triggered protests against the government.
Bukele compared his plan to the city founded by Alexander the Great. He said that Bitcoin City will be circular, with an airport, residential and commercial areas, and a central square that looks like a symbol of Bitcoin from the sky.
“If you want Bitcoin to spread all over the world, we should build some Alexandria,” said the 40-year-old tech-savvy Bukele, who declared himself as the “dictator” of El Salvador in a clear joke on Twitter in September. .
Bukele stated that El Salvador plans to issue its first bonds in 2022, which indicates that it will be issued 60 days later.
Samson Mow, chief strategy officer of blockchain technology provider Blockstream, told the gathering that the first 10-year bond, called a “volcano bond,” was worth $1 billion, backed by Bitcoin, and had a coupon rate of 6.5%. He said that half of it will be used to buy bitcoin in the market. Other bonds will follow.
Mow said that after five years of lock-in, El Salvador will begin to sell some bitcoins used to fund bonds, provide investors with “extra coupons,” and assume that the value of cryptocurrencies will continue to rise strongly.
“This will make El Salvador the world’s financial center,” he said.
The bond will be issued on the “mobile network” of the Bitcoin sidechain network. Mow said that in order to facilitate this process, the Salvadoran government is enacting a securities law and the first license to operate an exchange will be granted to Bitfinex.
The cryptocurrency exchange Bitfinex was listed as the bookkeeper of the bond in the speech behind Mow.
Mow said that once 10 such bonds are issued, $5 billion of Bitcoin will be withdrawn from the market within a few years. “If you let 10 more countries issue these bonds, half of the Bitcoin market value will be there.”
The “game theory” of bonds gave the first issuer Salvador an advantage. Mo argued: “If Bitcoin reaches $1 million at the five-year mark, I think they will. They will sell Bitcoin and sell it within two quarters. US$500 million was recovered.”
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