Bitcoin City is a proposed smart city project in El Salvador, which was unveiled by President Nayib Bukele in the beginning of his term. This ambitious project embodies Bukele’s vision for his country following his security success. It aims to establish a tax haven powered by geothermal energy from the nearby Conchagua volcano, with the energy generated fueling both Bitcoin mining operations and the city’s infrastructure.
Bitcoin City, El Salvador’s vision of a smart city
Designed as a circular metropolis shaped like a bitcoin, the city will include residential neighborhoods, commercial centers, museums, entertainment venues, an airport, and a port. The design emphasizes a blend of modern technology and sustainability, featuring a central plaza surrounded by smart buildings.
At the heart of this new metropolis, a large plaza will feature a giant “B” symbolizing Bitcoin. This space will house a museum dedicated to the cryptocurrency, offering residents and visitors insights into the evolution of money and the rise of digital currencies like Bitcoin.
Bukele first introduced the concept of Bitcoin City during his closing address at the Latin American Bitcoin & Blockchain Conference (LABITCONF) in 2021. “It will bring financial inclusion, investment, tourism, innovation, and economic development for our country,” he said.
Bitcoin city is Nayib Bukele’s flagship initiative. Following significant improvements to the country’s security, the Salvadoran president now aims to modernize the nation’s economy.
Bukele has pledged that Bitcoin City will have no income, property, procurement, or city taxes. The only tax residents will pay is a value-added tax (VAT), with half of the revenue allocated to servicing municipal bonds and the other half used for public infrastructure maintenance.
The city is planned next to La Union, a small port on the Pacific coast in the southeast of the country, known as an important destination for surfers. It is envisioned as an 100% renewable energy autonomous city. Bitcoin City’s power will come entirely from geothermal energy harnessed from the Conchagua volcano. The volcano’s heat will warm water basins, producing steam to drive the city’s energy generators.
The city’s layout will dedicate 50% of its space to residential areas, 20% to recreation, 10% to green spaces, 8% to industries and offices, 7% to digital infrastructure, 3% to eco-infrastructure, and 2% to transportation.
El Salvador: A Bitcoin haven
In 2021, El Salvador made history by becoming the first country to recognize Bitcoin as legal tender. This decision was followed by important legislative reforms. The Salvadorian Congress approved a law creating the National Digital Assets Commission, a regulatory body tasked with enforcing securities laws and protecting the rights of digital asset buyers and issuers. A Bitcoin Funds Administration agency was also established to manage and invest in digital currency funds.
El Salvador also introduced Chivo Wallet, an app offering services similar to those of a central bank digital currency (CBDC). The app enables users to pay peers and businesses, as well as to deposit and withdraw funds in both U.S. dollars, the country’s official currency, and Bitcoin.
In December 2023, El Salvador’s Congress approved a citizenship program offering Salvadoran passports to foreigners who make Bitcoin “donations” to the government’s social and economic development programs. This initiative allows participants to bypass the regular naturalization process and is one of various incentives launched by Bukele to attract foreign investors.
Bitcoin City’s cost and financing
Bukele estimated that building Bitcoin City would require about 300,000 bitcoins. These were valued at US $17 billion when the project was announced and over US $18.2 billion at today’s exchange rate. The project is expected to be financed through “Volcano Bonds,” Bitcoin-denominated bonds issued by the state-owned power company LaGeo. The initial plan was to issue US $1 billion in bonds, with half allocated to construction and the other half to Bitcoin investments for the City’s construction and for its Bitcoin mining facilities.
El Salvador has already made progress in developing its Bitcoin mining capabilities. As of May 2024, the country’s mine near the Tecapa volcano, which operates 300 machines, has extracted 474 bitcoins, valued at nearly US $29 million.
Current investments and progress
Recently, El Salvador secured a $1.6 billion investment from Turkish company Yilport Holdings to upgrade the ports of Acajutla and La Union, which are crucial to Bitcoin City’s infrastructure. This marks the largest private investment in El Salvador’s history and is part of a broader economic development strategy focused on enhancing logistic and trade opportunities. According to the government, construction will begin in late 2024.
Bukele explained that this investment will be rolled out in phases, starting with the modernization of Acajutla, El Salvador’s largest port. In addition to upgrading existing infrastructure and acquiring new equipment, additional facilities will be built, tripling the port’s capacity.
Despite these ambitious plans, construction of Bitcoin City has yet to begin. Delays in issuing the promised Volcano Bonds have raised concerns about the project’s viability. However, the government has started preliminary work, including construction of Conchagua Airport, also known as the Airport of the Pacific. The facility will cover 126,530 square feet and is expected to cost about $500 million.
In the meantime, businesses and street vendors in the area have already begun using Bitcoin for everyday transactions, in a process that is simplifying payments and currency conversions.
Related: Prospera, Honduras’ Bitcoin City