El Salvador to build Bitcoin City in bid to become ‘Singapore of Latin America’
- The project, funded by bitcoin-backed bonds, will be built near the Conchagua volcano which will provide energy for mining
- President Nayib Bukele said the city will be free of income, property and capital gains taxes
El Salvador plans to issue US$1 billion in tokenised US-dollar denominated 10-year bonds to pay 6.5 per cent via the Liquid Network, according to Samson Mow, chief strategy officer of Blockstream.
Half of the funds of the so-called “volcano bond” will be converted to bitcoin and the other half will be used for infrastructure and bitcoin mining powered by geothermal energy, Mow said, while sharing the stage with Bukele.
After a five-year lock-up period, the government will begin to sell its bitcoins and pay an additional dividend to investors, Mow said.
Blockstream models show at the end of the 10th year of the bond, the annual percentage yield will be 146 per cent due to bitcoin’s projected appreciation, Mow said, forecasting bitcoin will hit the US$1 million mark within five years.
Mow said the lock-up period on the bonds is designed to take US$500 million in bitcoin out of the market for five years, adding to the tokens’ scarcity and value.