El Salvador Reveals Plans to Build the World’s First Bitcoin City

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In a bold vision that blends cryptocurrency, clean energy, and urban innovation, El Salvador has announced plans to construct the world’s first Bitcoin City—a futuristic metropolis powered entirely by geothermal energy from a volcano and financed through Bitcoin-backed bonds. President Nayib Bukele unveiled the ambitious project during a closing event for a week-long Bitcoin promotion campaign in the coastal town of Mizata, marking another major step in the nation’s radical embrace of digital currency.

A City Built on Bitcoin and Volcanic Energy

Bitcoin City is set to rise in the eastern region of La Unión, strategically located near the Conchagua volcano. The city’s most distinctive feature? It will be powered entirely by geothermal energy harnessed from the volcano, making it one of the most sustainable urban developments in modern history.

“This is a fully ecological city that works and is energized by a volcano,” Bukele said, dressed in an all-white ensemble with a backward baseball cap, addressing a crowd of investors and crypto enthusiasts. “Invest here and make all the money you want.”

The tax model is equally revolutionary. The city will impose only one tax: a value-added tax (VAT). Half of the VAT revenue will go toward servicing the Bitcoin-backed bonds used to fund construction, while the other half will finance essential public services like waste management and infrastructure maintenance.

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Funding the Future: The Volcano Bond Initiative

Central to the city’s development is the launch of the so-called "volcano bond"—a $1 billion, 10-year sovereign bond backed by Bitcoin. Samson Mow, Chief Strategy Officer at Blockstream, explained that the bond would carry a 6.5% annual coupon and be issued on the Liquid Network, a Bitcoin sidechain designed for faster, confidential transactions.

Half of the bond proceeds—$500 million—will be used to purchase Bitcoin on the open market, while the remaining half will fund initial infrastructure projects. After a five-year lock-up period, El Salvador plans to begin selling portions of its accumulated Bitcoin holdings to provide investors with an additional return, assuming the price of Bitcoin appreciates significantly.

“If Bitcoin reaches $1 million at the five-year mark, which I think it will, they’ll sell Bitcoin in two quarters and recoup that $500 million,” Mow said.

The government aims to issue 10 such bonds over time, potentially removing $5 billion worth of Bitcoin from circulation for several years—a move that could have a profound impact on market supply and pricing dynamics.

A Modern-Day Alexandria

Drawing historical parallels, President Bukele likened Bitcoin City to the ancient cities founded by Alexander the Great—visionary hubs designed to spread ideas and prosperity. The city will feature a circular layout with residential zones, commercial districts, entertainment venues, and an international airport. From above, its central plaza will resemble the iconic Bitcoin symbol (₿)—a powerful visual statement of its digital identity.

Bukele, a tech-savvy leader known for his unorthodox communication style, has positioned El Salvador as a pioneer in cryptocurrency adoption. In September 2021, it became the first country in the world to adopt Bitcoin as legal tender, allowing citizens to pay taxes and conduct daily transactions using the digital asset.

Overcoming Skepticism and Building Trust

Despite Bukele’s enthusiasm, public sentiment remains divided. Opinion polls show that many Salvadorans are skeptical about Bitcoin’s role in their economy. Early implementation challenges—including technical glitches with the government’s Chivo wallet and protests against mandatory crypto adoption—have fueled social unrest.

Still, the government remains undeterred. To support the bond issuance and broader financial ecosystem, El Salvador is drafting new securities legislation and plans to license regulated crypto exchanges. Bitfinex has been named as the bookrunner for the volcano bond, signaling strong institutional backing.

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Frequently Asked Questions (FAQ)

Q: What is Bitcoin City?
A: Bitcoin City is a planned urban development in El Salvador designed to operate on Bitcoin and geothermal energy. It will have no taxes except VAT and will be funded through Bitcoin-backed bonds.

Q: How will Bitcoin City be powered?
A: The city will use geothermal energy generated from the Conchagua volcano, making it a sustainable, low-carbon urban center.

Q: What are volcano bonds?
A: Volcano bonds are $1 billion sovereign bonds backed by Bitcoin, issued to fund Bitcoin City. They offer a 6.5% coupon and are structured to benefit from potential long-term Bitcoin price appreciation.

Q: When will Bitcoin City be built?
A: Construction timelines depend on successful bond issuance. The first bond was initially expected in early 2022, with development progressing in phases over the following decade.

Q: Will residents have to use Bitcoin?
A: While Bitcoin is legal tender in El Salvador, usage in daily life remains optional for individuals. However, the city’s economic model is designed to incentivize crypto adoption.

Q: Could other countries follow El Salvador’s model?
A: Yes. If successful, Bitcoin City could inspire similar projects globally. Samson Mow suggested that if 10 more nations issued comparable bonds, it could absorb nearly half of Bitcoin’s total market cap.

Positioning El Salvador as a Global Financial Hub

Beyond infrastructure, Bukele envisions El Salvador becoming the financial center of the world—a haven for digital nomads, blockchain entrepreneurs, and crypto investors. With low taxes, renewable energy, and a pro-innovation regulatory environment, Bitcoin City could attract talent and capital from across the globe.

The broader implications are significant. By leveraging Bitcoin as both currency and collateral, El Salvador is testing a new model of sovereign finance—one that bypasses traditional banking systems and taps directly into global crypto markets.

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Core Keywords

As construction awaits funding and regulatory finalization, all eyes are on Central America. Whether Bitcoin City becomes a beacon of innovation or a cautionary tale will depend on execution, market conditions, and public trust. But one thing is certain: El Salvador is redefining what’s possible in the age of decentralized finance.