El Salvador plans to construct a “Bitcoin City” near a volcano that will be funded by the cryptocurrency, the country’s President Nayib Bukele announced Saturday.
The city will have residential and commercial areas, services, entertainment, restaurants and an airport and will be built near Conchagua volcano in south eastern El Salvador.
Construction will begin in 2022 and the city will have no taxes except from value added tax (VAT).
In June, El Salvador passed a law making it the first country in the world to accept bitcoin as legal tender. But not all of its population is on board with the move.
In September, thousands of people took the streets to protest against the law, fearing the introduction of the cryptocurrency could lead to instability in the central American nation.
The country has also launched a bitcoin wallet to allow citizens to use the cryptocurrency.
Separately, El Salvador plans to raise about $1 billion via a “Bitcoin Bond” in partnership with Blockstream, a digital assets infrastructure company. Half of the funds will be used to buy bitcoin, while the other $500 million will go toward energy and bitcoin mining infrastructure, the government said.
Mining is the energy-intensive process of creating new bitcoin by solving cryptographic puzzles. El Salvador said it plans to use geothermal energy from the volcano to power this.watch nowVIDEO08:42Why does bitcoin use so much energy?
Samson Mow, chief strategy officer at Blockstream, said that there is a five-year lock-up on the bond which is designed to take $500 million of bitcoin off the market for that period of time.
Investors in the bond will get an annual special dividend, Blockstream said.
Bitcoin has fallen about 16% from its record high of $68,990.90 which it reached earlier this month, but it is still up more than 90% this year.