Speaking at an event closing a week-long promotion of
Bitcoin in El Salvador, Bukele said the city planned in the eastern region of
La Union would get geothermal power from a volcano and not levy any taxes except
for value added tax (VAT). Bitcoin price in India stood at Rs. 46.84 lakh as of
10:30am IST on November 22.
"Invest here and make all the money you want,"
Bukele said in English, dressed all in white and wearing a reversed baseball
cap, in the beach resort of Mizata. "This is a fully ecological city that
works and is energised by a volcano."
Half of the VAT levied would be used to fund the bonds
issued to build the city, and the other half would pay for services such as
garbage collection, Bukele said, estimating the public infrastructure would
cost around 300,000 Bitcoins.
El Salvador in September became the first country in the
world to adopt Bitcoin as legal tender.
Although Bukele is a popular president, opinion polls show
Salvadorans are skeptical about his love of Bitcoin, and its bumpy introduction
has fueled protests against the government.
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.
"If you want Bitcoin to spread over the world, we
should build some Alexandrias," said Bukele, a tech savvy 40-year-old who
in September proclaimed himself "dictator" of El Salvador on Twitter
in an apparent joke.
El Salvador planned to issue the initial bonds in 2022,
Bukele said, suggesting it would be in 60 days time.
Samson Mow, chief strategy officer of blockchain technology
provider Blockstream, told the gathering the first 10-year issue, known as the
"volcano bond", would be worth $1 billion, backed by Bitcoin and
carrying a coupon of 6.5%. Half of the sum would go to buying Bitcoin on the
market, he said. Other bonds would follow.
After a five year lock-up, El Salvador would start selling
some of the Bitcoin used to fund the bond to give investors an "additional
coupon", Mow said, positing that the value of the cryptocurrency would
continue to rise robustly.
"This is going to make El Salvador the financial centre
of the world," he said.
The bond would be issued on the "liquid network",
a Bitcoin sidechain network. To facilitate the process, El Salvador's
government is working on a securities law, and the first license to operate an
exchange would go to Bitfinex, Mow said.
Crypto exchange Bitfinex was listed as the book runner for
the bond on a presentation behind Mow.
Once 10 such bonds were issued, $5 billion in Bitcoin would
be taken off the market for several years, Mow said. "And if you get 100
more countries to do these bonds, that's half of Bitcoin's market cap right
there."
The "game theory" on the bonds gave first issuer
El Salvador an advantage, Mow argued, saying: "If Bitcoin at the five-year
mark reaches $1 million, which I think it will, they will sell Bitcoin in two
quarters and recoup that $500 million" © Reuters