Back in June of this year, El Salvador—the smallest country in Central America—passed a somewhat controversial law that legalized accepting Bitcoin as legal tender. Surprisingly, the tiny nation of just under 6.5 million citizens was the first in the world to recognize cryptocurrency in such a significant way. Now, however, the Salvadoran government, headed by a popular albeit polarizing leaders, 40-year-old Nayib Armando Bukele Ortez, is doing something even bigger with Bitcoin: It’s going to build a volcano-powered energy grid that’s going to be partially paid for with $1 billion worth of sovereign bonds backed by—you guessed it—Bitcoin.
Bukele and his government didn’t make this decision on a whim. On the contrary, they put a lot of thought into their plan: The city would boast no property, income, or capital gains taxes, which would benefit both local corporations and residents. Not to mention, all of the infrastructure (and any additional to-be-expected miscellaneous costs that come with building a city from scratch) will be funded by both a sales tax and money provided by the bond issues themselves. And they will be U.S. dollar-denominated 10-year bonds, half of which will be converted to Bitcoin, and the other half used for projects like Bitcoin mining.
And like any contemporary—even slightly idealistic—government endeavor in the 21st century, there’s an environmental component to the Bitcoin city. It’s going to be constructed near a volcano, which will supply renewable energy to the new hopefully bustling municipality.
It’s all happening rather quickly too. The current plans have the construction starting within the first half of 2022, which feels a little fast for Salvadorans, especially because Bukele’s shining metropolis feels more like another unnecessary excuse for the crypto-rich to avoid paying taxes. And the city itself would cost roughly $17 billion to build, which falls in line with the plans of someone who once used his Twitter bio to refer to himself as “The coolest dictator in the world.” It now reads: CEO of El Salvador. Yes, he’s positioning himself as the hip, young leader of a country. Yet, not everyone in the country likes the idea. In fact, thousands of Salvadorans have taken to the streets in a show of frustration with the plans.
During his presentation at a popular beach resort, Bukele instructed people to “Invest here and make all the money you want,” which sounds promising, but raises the question: Is this cool city of the future just another opportunity for already rich people to invest their wealth without having to pay a single dollar in taxes? Until the city actually breaks ground, there’s no answer, but with a popularity rating well over 80%, Bukele could be onto something positive that actually benefits his constituents both financially and environmentally.