Updated: Dec 1, 2021
Location: Near the Conchagua volcano. The oceanside Conchagua volcano sits in southeastern El Salvador on the Gulf of Fonseca.
Expenses: The city will cost 300,000 Bitcoins that’s about 20 Billion US dollars.
Design: The city will be laid out in a circle (like a coin). In the city center will be a plaza that will be host to a huge Bitcoin symbol. There would be residential areas, malls, restaurants, and a port in the Bitcoin city. Likening his plan to cities founded by Alexander the Great, Bukele said Bitcoin City would be circular, with an airport, residential and commercial areas, and feature a central plaza designed to look like a bitcoin symbol from the air.
Facilities: the country will have access to “digital education, technology and sustainable public transportation.
Taxes: the only tax collected there will be the value-added tax, half of which will be used to pay the municipal bonds and the rest for municipal infrastructure and maintenance. no property, income or municipal taxes and the city would have zero carbon dioxide emissions.
Info on Bond: Bitcoin city would be funded with the issuance of $1 Billion Bitcoin Bond half of which ($500 millions) would be used to build energy and mining infrastructure, and the rest ($500 millions) will be used by the country to buy more Bitcoins. The issuance of these bonds will be managed by Blockstream. The tokenised bond will be available to a number of users in the world that will have access to invest in small amounts as low as $100 dollars. Liquid Network and Blockstream AMP. Dividends will be paid easily to bondholders using tools deployed on top of the Liquid network. Bonds can be traded 24/7 with other assets like stablecoins, using protocols that help eliminate the need for trust. Bukele said El Salvador planned to issue the bond in 2022, suggesting it could be as soon as in 60 days time. will be U.S. dollar-denominated 10-year bonds and carry a coupon of 6.5%. That is well below the 13.5% interest rate yield El Salvador's 10-year bonds are currently trading at. The premium investors demand to hold El Salvador bonds rather than ultra-safe U.S. government bonds has also more than doubled since June when Bukele's push to make bitcoin legal tender started. Crypto exchange Bitfinex was listed as the book runner for the bond. It is not known when exactly next year the bond would be launched or when El Salvador would buy the $500 million worth of bitcoin it sees as crucial to the plan. The legal rights of would-be buyers have also not yet been detailed. It is also not known what would happen to the new bonds if the country defaulted on its existing traditional bonds. The government's next bond deadline is an $800 million repayment due in January 2023. That bond is currently trading at a near 20% discount from its face value due to El Salvador's debt problems. The International Monetary Fund, whose help El Salvador is expected to need to ease its problems, has not yet commented on the volcano bond plan. Earlier in the year, it said it had both economic and legal concerns about El Salvador making bitcoin legal tender.
Benefits of bond: After a five year lock-up of the bonds, El Salvador would eventually start selling some of the Bitcoin used to fund the bond to give investors an “additional coupon. El Salvador would start selling crypto holdings after five years and pay an extra dividend to bondholders. With an initial 6.5 percent yield, this could represent a significant windfall for the country. Once 10 such bonds were issued, $5 billion in Bitcoin would be taken off the market for several years, and if you get 10 more countries to do these bonds, that’s half of Bitcoin’s market cap right there. if the value of Bitcoin at the five-year mark reaches $1 million, which he firmly believes, then El Salvador “will sell Bitcoin in two quarters and recoup that $500 million.”
Nayeb Bukele Exact Words: “ It’s gonna be right there in Fonseca Gulf and it is gonna include everything. Residential area, commercial area, services, museums, entertainment, bars, restaurants, airport, port, rail, everything. In the beginning, we will power the city with the old volcano and old power plant. But, then we will build a new one right next to the city. The volcano will power the whole city and will also power the mining. The city is going to be a circle except the centre. In the centre there is going to be a huge plaza which would look like a Bitcoin sign from the air. So, you have everything, regulations, economic policies, digital zones. The strategical location that Fonseca Gulf is shared with; Honduras, Nicaragua, and El Salvador. As Fonseca Gulf is shared with three countries, so, this will be an international area. The government will provide the land, infrastructure, public infrastructure. The economic area will attract the investors. They will contribute to the development and construction of the city. And of course, Bitcoin city is committed to free and equal access to everything. There we’ll have digital education, and the social polycentric urban configuration. We have digital and physical arts and culture, equality and accessibility to digital system. Geothermal energy will facilitate business and technology investment and of course, sustainable and efficient public transportation. The area will be hugely technological but also hugely sustainable and green. We are going to have an industrial and office space. Everything is going to be a digital environment. Everything has been taken into consideration. Electricity, recreation, water treatment, waste management, etc. The airport will be 10 miles away and th eport will be 5 kilometers away. The city will have private entrepreneurship and investment.
About Investors and Investment: He said;
If I had a digital company, why wouldn’t I wanna be there. It’s logical for me and everybody that we have to be there. Everybody wants an office space over there. So, office space builders are invited to build something because you will have a lot of clients looking for office space. And apartment builders build apartments because you will have a lot of people looking for apartments over there. The plaza would be beautiful. It will be made of colored stones. So, you have that beautiful thing made up of orange and gray stones so, it will last for thousands of years. We will have xero income tax, zero capital gains tax, zero property tax. So, invest here and make all the money you want. Trade whatever you want. If you are making a huge building, you are not going to pay property tax for that. Zero payroll tax. We want you to hire people. Not to pay taxes for hiring people. Zero municipal taxes. Zero CO2 emissions because it is a fully ecological city that is energized by a volcano. The only tax you will pay is the value added tax. The bonds will be available in 2022.
Chief strategy officer Blockstream, Samson Mow was invited to explain. He said:
This a very historic moment. We are going to issue Bitcoin bonds. These bonds are amazing.The first one is going to be a billion dollar bond. What makes it a Bitcoin bond? It is backed by Bitcoin. Half of the billion dollars will go into buying the Bitcoin. The other half will go into infrastructure, specificaly building energy infrastructure and Bitcoin mining. So, it is going to be called a volcano bond. This is going to be a series. The first bond is called ebb 1 or el salvador bitcoin bond 1. But there will be more. The coupon is 4.5 %. But there is also a special Bitcoin dividend. After a five year lock up, they will start selling some of the 500 million dollars Bitcoin to give an additional coupon to all the investors in the bond. By the tenth year, the APY will be 146%. So, the Bitcoin is 6.5% for the first five years and then it’s getting a bitcoin boost. This product is going to be incredibly attractive for people who hold Bitcoin, investors, people that have Stablecoins. But, also for traditional financial investors, industrialists, bankers. Because, there is no instrument like this in the market. This bond is going to be issued on the liquid network ( A bitcoin side chain). And to make that happen there needs to be a few things that are done. The government is working on modern digital securities laws. They will be issuing the first license to operate a security exchange here in el salvador to Bitfinex. This is going to make El Salvador, a financial centre of the world. Bitfinex has a lot of whales so, I don’t see a problem filling a billion dollar bond. If you want to invest in El salvador, these bonds are the easiest way to do that. If you want to invest directly in bonds or in any other things, you just buy the bonds and the rest takes care of itself. Bitcoin is going to save the world and it starts here in El Salvador.