Plans bitcoin powered volcano financed bonds

President Nayib Bukele said El Salvador plans to build the world’s first “Bitcoin City”, powered by a volcano and financed by cryptocurrency bonds.

Bitcoin City “is gonna include everything: residential areas, commercial areas, services, museums, entertainment… airport, port, rail,” Bukele said at the Latin American Bitcoin and Blockchain Conference on Saturday.

El Salvador, which has used the US dollar for two decades, was the first country in the world to legalize bitcoin as legal tender.

Bukele said the Conchagua volcano “will power the whole city and will also power the mining.”

Bitcoin mining is the process by which new bitcoin is created using computers that solve complex mathematical problems — a process that demands huge amounts of energy.

In El Salvador, some of that energy comes from a geothermal plant fed by the Tecapa volcano.

In El Salvador, some of that energy comes from a geothermal plant fed by the Tecapa volcano.

Bukele said the city would initially be powered by the Tecapa plant before his government builds a new geothermal plant powered by Conchagua.

“Zero Co2 emissions. This is a fully ecological city,” Bukele told the crowd.

To fund the project, El Salvador will issue $1 billion “Bitcoin bonds” in 2022, according to Samson Mow, chief strategy officer of Blockstream, a blockchain tech provider.

On stage with Bukele, Mow said half of “volcano bonds” would be invested in Bitcoin, and the other half in infrastructure.

“El Salvador will be the financial centre of the world,” Mow said.

Bukele said that Bitcoin City will only charge value added tax.

“We will have zero income tax. Zero per cent fore ver. Zero capital gains tax…

El Salvador, the conventional bond market offers far greater returns than 6.5%.

And so, with no economic incentive to invest in this bizarre instrument, it is highly unlikely to turn into a recurring source of liquidity.

Moreover, Bukele has proven to be a law unto himself. Logically, if El Salvador were able to raise the cash to repay its Eurobonds, it would make little sense to default on them. But who is basing their actions on logic? Not the Salvadorean government.

Worst of both worlds

Bondholders should really be hoping that the plans for the Bitcoin bond are not just kicked into the long grass but dropped deep into the crater of the Conchagua volcano that is supposed to power Bitcoin City.

If the bond goes up in smoke, so might Bukele’s far-fetched Bitcoin-related economic plans, and the government would have to face reality.

Plans bitcoin powered volcano financed bondseal

Bukele said the city would initially be powered by the Tecapa plant before his government builds a new geothermal plant powered by Conchagua.

“Zero Co2 emissions. This is a fully ecological city,” Bukele told the crowd.

To fund the project, El Salvador will issue $1 billion “bitcoin bonds” in 2022, according to Samson Mow, chief strategy officer of Blockstream, a blockchain tech provider.

On stage with Bukele, Mow said half of “volcano bonds” would be invested in bitcoin and the other half in infrastructure.

“El Salvador will be the financial center of the world,” Mow said.

Bukele said that Bitcoin City will only charge value added tax (VAT).

“We will have zero income tax. Zero percent forever. Zero capital gains tax… zero property tax, zero payroll tax,” he said.


President Nayib Bukele said El Salvador plans to build the world’s first “Bitcoin City”, powered by a volcano and financed by cryptocurrency bonds.

Bitcoin City “is gonna include everything: residential areas, commercial areas, services, museums, entertainment… airport, port, rail,” Bukele said at the Latin American Bitcoin and Blockchain Conference on Saturday.

El Salvador, which has used the US dollar for two decades, was the first country in the world to legalize bitcoin as legal tender.

President Nayib Bukele said El Salvador will build the world’s first bitcoin city, powered by a volcano.

A more orthodox economic policy would then be required to open doors to new financing.

As things stand, we may be on course for the worst possible outcome. There’s a decent chance that the Bitcoin bond is neither a roaring success that leaves El Salvador with plenty of cash to repay its Eurobonds, nor a complete flop that forces a comprehensive rethink.

If the deal limps over the line, it could be enough to encourage Bukele to push harder with the Bitcoin agenda, distancing his country further from conventional sources of funding, but not enough to allow El Salvador to repay its debt.

MIZATA, El Salvador — President Nayib Bukele said El Salvador plans to build the world’s first “Bitcoin City”, powered by a volcano and financed by cryptocurrency bonds.

Bitcoin City “is gonna include everything: Residential areas, commercial areas, services, museums, entertainment… airport, port, rail”, Bukele said at the Latin American Bitcoin and Blockchain Conference on Saturday.

El Salvador, which has used the US dollar for two decades, was the first country in the world to legalise bitcoin as legal tender.

Bukele said the Conchagua volcano “will power the whole city and will also power the mining”.

Bitcoin mining is the process by which new bitcoin is created using computers that solve complex mathematical problems — a process which demands huge amounts of energy.

In El Salvador, some of that energy comes from a geothermal plant fed by the Tecapa volcano.

Although crypto acolytes are excited about El Salvador’s ‘bitcoin as legal currency’ experiment, the world’s first,regulators have greeted it frostilyfor themost part. But for developing nations, their perspectives can be very different. As a store of value, as a means of exchange, and as a unit of account, national currencies in some developing countries too often fall short.

That said, emerging markets are indeed a fertile ground for cryptocurrencies.
Experts suggest unpredictable inflation and fast-moving exchange rates, clunky and expensive banking systems, financial restrictions, and regulatory uncertainty all work to undermine the appeal of the classic financial system in many of these countries.

Bukele said the Conchagua volcano “will power the whole city and will also power the mining.” Currently, around a quarter of El Salvador’s total energy is already generated by geothermal plants as El Salvador is literallydubbed the “land of the volcanoes” and is one of the most geologically active places, according to official data.

To top it off, with 20 “potentially active” volcanoes within its borders according toVolcanoDiscovery.com, whichaccountfor nearly 22% of the country’s energy supply, El Salvador’s harnessing of geothermal energy could provide an answer to the hunt for a reliable clean energy source topower bitcoin mining.

Bitcoin mining is the process by which new bitcoin is created using computers that solve complex mathematical problems — a process that demands huge amounts of energy.

There’s no danger of an institutional investor taking on El Salvador debt with a 6.5% coupon when the sovereign’s 7.75% January 2023s are trading in the low 80s.

Rather, when bondholders say they want the Bitcoin bond to succeed, all they mean is that they want the cash-strapped country to discover some amazing new source of liquidity.

To fully flesh out the theory: if El Salvador can raise loads of money by issuing Bitcoin bonds, it can then start paying off its Eurobonds. The president can declare El Salvador’s independence from the tentacles of the global financial system, and the global financial system can bid El Salvador good riddance.

Observers may have differing views on whether that would be good news for the people of El Salvador.

But it would certainly be one less headache for EM bond buyers.

Leave a Reply

Your email address will not be published.