Nayib Bukele, the president of El Salvador, announced the launch of Bitcoin City, which will be funded initially by Bitcoin bonds worth $1 billion.
Announcing the initiative at El Salvador's Bitcoin Week conference, which aimed to promote bitcoin's mainstream adoption in the country and increase citizen participation, Bukele unveiled the project for the first time.
Bukele said, "Technology and digital education will be provided in Bitcoin City. The city will use geothermal energy and have efficient and sustainable public transport."
A number of prominent crypto companies are involved in the development of Bitcoin City, including cryptocurrency exchange Bitfinex and Adam Back's Blockstream. A securities platform to hold Bitcoin bonds will be launched by Bitfinex CTO Paolo Ardoino to support El Salvador's Bitcoin City initiative. Ardoino said:
"[The platform] will soon be home to many local and foreign digital asset offerings, helping to develop a new regulation for digital assets in the country! Together, El Salvador, Bitfinex, and Blockstream are making history."
As Bitcoin City expands, it will include residential areas, shopping malls, restaurants, a port, and everything else related to Bitcoin.
Moreover, residents are only charged value-added tax (VAT), which will be used to pay the bond obligations of the municipality, and the rest to maintain public infrastructure and city services.
Samson Mao, chief security officer of Blockstream, discussed the possibility of sourcing the $1 billion Bitcoin bond:
"The whales that use Bitfinex has been substantial. A $1 billion bond should be no problem."
A five-year lockup period will also apply to the $500 million worth of Bitcoin bonds, effectively removing the invested capital from circulation.
Furthermore, he explained how a 10-fold increase in similar initiatives from other countries would eventually wipe out half of Bitcoin's 21 million market capitalization.
El Salvador's government has started reinvesting unrealized gains from Bitcoin into infrastructure development projects since the currency's mainstream adoption.
In early November, Bukele announced that the state's Bitcoin Trust account would earn surplus funds for the construction of 20 new schools:
"At the time this project was started, the amount we had made in FIDEBITCOIN [the state trust account for bitcoin] was much smaller than it is now. Thus, we have decided to establish 20 Bitcoin Schools at the start of the project."
A new veterinary hospital in San Salvador was constructed with profits from El Salvador's Bitcoin Trust reinvesting $4 million in mid-October.