The madness….
Bitcoin CityBukele is also pushing forward with plans to construct a new "Bitcoin City" in the shadow of El Salvador's Conchagua volcano. The idea would be to create a global hub for cryptocurrency users and entrepreneurs—all powered by geothermal energy from the volcano. On Monday, Bukele tweeted photosof himself reviewing a scale model of the planned metropolis.
To jumpstart the project, Bukele is planning to sell $1 billion worth of "bitcoin bonds." In an unusual financial arrangement, half the proceeds would be invested in bitcoin, while the other half would be spent on infrastructure projects for the new city. If bitcoins gain value over the 10-year life of the bond, bond investors would get half the gains.
Critics pointed outthat this arrangement makes little sense, since people who want to invest in bitcoin can invest directly in bitcoin and get 100 percent of any gains. But Bukele is counting on the novelty of the bonds—which are slated to be tokenized and sold on a blockchain—to attract investors.
These bonds were initially scheduled to be introduced in March. But that month the government postponedthe debt issuance, citing the economic turmoil caused by Russia's invasion of Ukraine. El Salvador's finance minister said that the bonds would be introduced in September at the latest.
But if El Salvador doesn't improve its financial position, it may become increasingly dfficult to issue debt of any kind, since investors will be worried about the risk of an impending default.
