El Salvador has announced plans to build the world's first 'Bitcoin City' whose infrastructure will be funded by Bitcoin bonds and where residents won't have to pay income tax. The announcement comes two months after the country declared Bitcoin as legal tender, enabling Salvadoreans to pay for their daily expenses and taxes with the world's largest cryptocurrency. As part of its plans to make El Salvador the world's largest destination for Bitcoin-related investments, the country also offered residency to anybody who invests three Bitcoins in the national economy.
El Salvador is also aiming to become a cryptocurrency mining hub, with President Nayib Bukele claiming that the country will offer cheap, renewable and zero-emission energy from its volcanoes for Bitcoin mining. Alongside El Salvador, Bitcoin is also gaining mainstream acceptance in the United States, where the first Bitcoin ETF began trading at the New York Stock Exchange (NYSE) last month. AMC Theaters also recently announced plans to accept Bitcoin and other cryptocurrencies for online payments, possibly paving the way for more mainstream adoption of the technology.
Speaking on the last day of a week-long Bitcoin event in El Salvador, President Nayib Bukele said that the so-called 'Bitcoin City' would come up in the eastern region of La Union along the Gulf of Fonseca. He also reiterated ambitious plans to build a geothermal power plant next to a nearby volcano to power the city and the planned Bitcoin mining activities in the region. According to Bukele, Bitcoin City will be a full-scale township with residential and commercial areas, as well as an airport. He added that it will be circular in shape, like a coin, and will also have regular rail service.
Bitcoin City Will Not Levy Any Income Tax
Bukele also claimed that the new city would not levy any income tax nor charge any property, capital gains or payroll taxes. The only tax the new town residents will have to pay is a value-added tax (VAT) that will fund the public infrastructure. While half of the VAT will be used to support the Bitcoin bonds, the other half will be used to maintain essential services in the city, such as garbage collection, etc.
President Bukele also announced that El Salvador would issue at least $1 billion worth of Bitcoin bonds to build the city's infrastructure. The bonds will be developed by a U.S.-based Bitcoin services company named Blockstream, while Bitfinix Securities will make the first crypto exchange in the city. In a press release on Sunday, Blockstream confirmed that the company would develop the Bitcoin bonds on the Liquid Network. The amount will be split into two halves, with $500 million allotted to buying more bitcoin. The other half will be spent on energy and Bitcoin mining infrastructure in the region.
Source: Reuters, Blockstream