In El Salvador, the government is funding a billion dollar bitcoin city powered by a volcano. These $1 billion are being run as bitcoin securities on Blockstream’s Liquid Network, a side chain of the bitcoin blockchain.
The President of El Salvador, Nayib Bukele, remains bullish on cryptocurrency, announcing the creation of a “Bitcoin City” that is tax-free on income and wealth. The construction of the city is said to be funded by bitcoin government bonds issued through the Liquid Network and later by sales tax.
The president plans to issue a 10-year bond in early 2022. Bondholders who do not have citizenship will receive an express citizenship issuance. The $1 billion bond is scheduled to close in for five years and carry a coupon of 6.5%. 500 million US dollars will be used to buy bitcoins and after selling bitcoins, additional dividends will be paid to investors after five years. El Salvador is like Bitfinex Book manager Bond license.
Bitcoin adoption maturing
The other $500 million will be used to develop geothermal infrastructure in La Union, in eastern El Salvador. The city will have a square that appears as a bitcoin symbol when viewed from the air.
When was bitcoin introduced as legal currency?There were supporters and opponents alike, and many technical complications arose from day one. The country now holds at least 1,100 BTC worth about $60 million USD. The companies were initially skeptical about accepting cryptocurrencies for goods and services. At the beginning of October this year, only 7% of stores were set to receive bitcoins. McDonald’s and Starbucks were among the first merchants in El Salvador to accept cryptocurrency.
Criticisms of Bukele’s Strategy
Rohan Gray, an expert at the Global Digital Currency Initiative, was more critical of El Salvador’s strategy, pointing out that Bukele has used Bitcoin adoption in the country mostly as a marketing gimmick, while concrete things haven’t been done. However, these latest developments seem to paint a different picture.
“Mr Bukele is a young boss trying to cash in on the popular image. There is a lot of PR value in announcing something like this, even if you haven’t worked out all the details yet.“ – Rohan Gray, Global Cryptocurrency Expert, Global Initiative BBC interview
In general, Gray warned that a country adopting a cryptocurrency as legal tender gives the network too much control. In his opinion, this network is unstable, has no responsible actors, and has no proven track record. Gray also does not believe that it provides price stability or liquidity – which is fundamental to the currency.