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El Salvador’s Bitcoin City: What do you have to know about it?

source-logo  cryptopolitan.com 22 November 2021 09:12, UTC
  • El Salvador’s president announced a plan for a completely Bitcoin (BTC) based city.
  • The city is intended to be a tax-free and no levies will be charged, except charging a value-added tax (VAT).
  • All financial transactions in this city can be done using Bitcoin.
  • The funding for the city will also be conducted using Bitcoin bonds.

The ‘Bitcoin City’ plan

A decade back, no one might have imagined a city being funded by cryptocurrency, but it is becoming a reality. The president of El Salvador, Nayib Bukele, recently announced the project for developing a “Bitcoin City.” He made this known during the Latin American Bitcoin and Blockchain Conference and further noted that the city will be entirely financed and run using Bitcoin.

He revealed the city would be powered by geothermal energy from the Conchagua volcano. This energy will also be used in the mining of cryptocurrency. In addition to this volcano, an additional source of power will be the Tecapa volcano’s thermal plant. What makes this announcement an attraction for many is the 0% CO2 emissions, as the power sources won’t cause any harm to the environment.

In addition to that, the Bitcoin city will be tax-free except for a value-added tax (VAT). Hence, the citizens won’t have to face tax-related problems in this modern crypto-based city.  

The Bitcoin funds planned for this project will be managed by a blockchain tech provider firm, Blockstream. The project’s strategy officer, Samson Mow, said that $1 billion bonds would be used initially for this project. El Salvador’s government intends to start issuing these bonds in 2022. Once these bonds are issued, El Salvador’s government will invest half of it into Bitcoin while the remaining half will be channeled towards the development of the city’s infrastructure.

It will be a city that provides all necessities that a traditional city has. These include residential areas, commercial blocks, health facilities, educational institutes, entertainment areas, etc. It will be a perfect example of a modern city that is not only based on Bitcoin but will also be used in developing it. The central building of the city will resemble Bitcoin’s shape.

Though the project has been announced and the bonds will be issued soon, El Salvador’s government has not issued any specific timeline to start the construction of the Bitcoin city. However, the location of the prospective city has been specified, which is reportedly the La Unión region.

This project has attracted interested investors because of the perks that it promises. The city is estimated to cost about BTC 300,000 for construction. The additional dividend from investment in Bitcoin, other than those spent on construction, will be divided amongst the investors.

Legal Status of Bitcoin in El Salvador

El Salvador is the very first country in the world to legally recognize BTC as a currency. Before the acceptance of Bitcoin as legal tender, El Salvadorans were already using the US dollar for two decades.

It is as a result of the legal recognition of BTC in El Salvador that the government has taken a step further to benefit from the growth of Bitcoin. As it is projected that the worth of Bitcoin will cross US$1 million in a decade, it will bring massive benefits to the investors. If the Bitcoin city project succeeds, El Salvador will likely become the center of the world’s Bitcoin market.

El Salvador’s government has worked on the promotion of digital currency. It has issued digital wallets to its citizens, which can be used for the purchase of items.

A New Future – Bitcoin Based Economy

The establishment of the Bitcoin city could mark the start of a new era of an economy based on Bitcoin. Other counties are likely to follow the example, moving to smart cities. It will also help with the growth of Bitcoin, which has been on the uptrend since this year.

The world has already been struggling to make it a reality. El Salvador’s president has taken this huge step, setting an example for other states. Though it might take time for complete success, it will be a move changing the traditional concept of the economy.

Despite the prospects that this project brings with it, it is expected that it will cause protests. It is because of the inflation and instability that it might bring into the country. This project promises to bring new jobs to the market, but the El Salvadorian public still seems divided over this issue.

Though the prospects of this project are fifty-fifty because of fluctuations in BTC’s value, it will open up new opportunities for digital investments.

Conclusion

The Bitcoin city will bring enormous changes to the state-level economy and is considered a breakthrough. Though yet in the planning phase, it will have huge impacts on the future of crypto investments. It will also determine the trust of investors in these like projects. Considered a giant step, it will decide the fate of El Salvador because of the massive investments.

cryptopolitan.com