President Nayib Bukele stated in the seaside village of Mizata to a throng of applauding Bitcoin aficionados that <a href="https://www.cryptoknowmics.com/news/el-salvador-to-soon-launch-bitcoin-backed-city-using-1-billion-btcs/">El Salvador</a> plans to issue the world's first sovereign Bitcoin bonds and establish Bitcoin City, which will be free of income, property, and capital gains taxes.

According to Samson Mow, chief strategy officer of Blockstream, El Salvador aims to sell $1 billion in tokenized US dollar-denominated 10-year bonds that will pay 6.5 percent via the Liquid Network. Mow, who shared the platform with Bukele, claimed that half of the proceeds from the so-called "volcano bond" will be converted to Bitcoin and the other half will be utilized for infrastructure and Bitcoin mining fueled by geothermal energy.

The government would begin selling its Bitcoins and paying an extra dividend to investors after a five-year lockup period, according to Mow. 

Because of Bitcoin's expected gain, Blockstream models predict that by the conclusion of the bond's tenth year, the annual percentage yield will be 146 percent, according to Mow, who predicts that Bitcoin will achieve the $1 million mark within five years.

The bonds' five-year lockup term, according to Mow, is meant to remove $500 million in Bitcoin from the market, increasing the tokens' scarcity and worth.

Bitcoin hit an all-time high of over $68,000 in early November but has since lost roughly 20 percent of its value. Bukele has "bought the dip" on several occasions when the price of Bitcoin has dropped. The country has at least 1,100 tokens as of the end of October.

El Salvador will become "the financial capital of the globe" and "the Singapore of Latin America," according to Mow, who expects other Latin American countries to follow suit. "The first countries to do so will gain a significant edge." "This is the start of nation-state Bitcoin FOMO," Mow remarked, using the term "fear of missing out" to describe the situation.

While standing next to Bukele, Mow stated that investors will be granted permanent residence and will be expedited to citizenship. According to Bukele, Bitcoin City would be built near the Conchagua volcano, which will supply electricity for mining. Bitcoin bond issuing will commence in 2022. According to him, the sole tax in Bitcoin City will be a 10 percent value-added tax to support city building and services.

El Salvador became the first country to adopt Bitcoin as legal cash in September, a decision that has sparked both excitement and criticism in the months following.

Coinflation in EL Salvador: Tokenized Bitcoin and Tax-free Bitcoin City

Prabhjeet Bhatla is a cryptocurrency writer covering startups and a researcher since 2020. She has authored many articles for Entrepreneur India and APAC (digital and print) on cryptocurrency and ever-evolving Blockchain, the technology behind Bitcoin, and other cryptocurrencies. She specializes in applied cryptography, privacy-enhanced information storage systems, anonymous cryptocurrencies, elliptic curve crypto-systems, and satellite television piracy.

Coinflation in EL Salvador: Tokenized Bitcoin and Tax-free Bitcoin City

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