In the eastern region of El Salvador lies La Unión, a small city that could one day become a groundbreaking experiment in economic design—if President Nayib Bukele’s ambitious plans come to fruition. Dubbed "Bitcoin City," the proposal promises a tax-free, geothermal-powered urban center funded by bitcoin bonds. However, amid technical glitches, bond delays, and public skepticism, the future of this crypto utopia remains uncertain.
The Vision Behind Bitcoin City
Bitcoin City was first introduced by President Bukele in November 2021. The blueprint outlines a circular city—shaped like a coin—featuring residential and commercial zones, restaurants, an airport, a seaport, and rail services. Perhaps its most attractive proposition is the complete absence of income, property, and capital gains taxes.
The city is intended to be powered by geothermal energy from a nearby volcano, aligning with El Salvador’s push toward renewable resources. The project is designed to be financed through a $1 billion bitcoin-backed bond, half of which would fund infrastructure and bitcoin mining operations, while the other half would be used to purchase more bitcoin.
Local Perspectives: Hope and Hesitation
Interviews with residents of La Unión reveal a mix of optimism and doubt. Many hope the project will bring economic growth and foreign investment to a region that has long been overlooked.
Amilcar Alvarado, a manager at a major shoe store franchise, noted that the announcement was initially met with enthusiasm. “There is little commerce here. Bitcoin City could help the economy grow and transform La Unión,” he said.
Anxel Miguel Flores Lainez, a government-appointed agent assisting users with the state-run Chivo wallet, also views the project as a potential catalyst for development. “We’ve been sidetracked for a long time. The port here is unused. Many believe La Unión can finally grow.”
Still, uncertainty looms. Delays in the bond issuance and the rocky rollout of the Chivo wallet have left some skeptical about whether the government can deliver on its promises.
Delayed Bond Issuance and Structural Challenges
A core component of Bitcoin City’s funding is the $1 billion bitcoin bond, developed in partnership with blockchain technology firm Blockstream. The bond offers a 6.5% annual coupon over a 10-year term and allows investors to share in profits from bitcoin liquidations beginning in the sixth year.
Originally scheduled for mid-March 2022, the bond has yet to be launched. Finance Minister Alejandro Zelaya cited the Ukraine-Russia conflict and unfavorable global conditions as contributing factors.
Michael Peterson, founder of the Bitcoin Beach initiative in El Zonte, believes the project may have been rushed. “Bitcoin City was something that came together at the last minute,” he said. Despite this, he remains hopeful: “It could come to fruition and have a big impact on the world.”
Adoption Reality: Dollars Still Dominate
Although the Salvadoran government has strongly promoted bitcoin adoption—making it legal tender in September 2021 and airdropping $30 in bitcoin to citizens who downloaded the Chivo wallet—the U.S. dollar remains the preferred currency.
According to a survey by El Salvador’s Chamber of Commerce and Industry, 86% of businesses have not made a sale in bitcoin. Only 3.6% reported increased sales due to bitcoin acceptance, while over 91% of Salvadorans still prefer being paid in dollars.
Cecilia Salazar, a store manager in La Unión, noted that only 10–15 customers per day pay with bitcoin, mostly locals. Bitcoin’s price volatility remains a significant barrier, along with a lack of technological literacy, especially among older citizens.
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Broader Implications for El Salvador
El Salvador’ Bitcoin ambitions extend beyond Bitcoin City. The country has drawn international attention—and criticism—for its embrace of cryptocurrency, attracting both investors and skeptics.
The success or failure of Bitcoin City could influence how other nations approach cryptocurrency integration, regulatory frameworks, and digital economies. It also raises questions about financial inclusion, technological infrastructure, and the real-world usability of crypto assets.
Frequently Asked Questions
What is Bitcoin City?
Bitcoin City is a proposed tax-free, geothermal-powered urban development in El Salvador, designed to be funded through bitcoin-backed bonds. It aims to become a global hub for cryptocurrency innovation.
Why has the bitcoin bond been delayed?
The bond issuance has been postponed due to global economic uncertainty, including the impact of the Ukraine-Russia conflict, as well as logistical and market-related challenges.
Are Salvadorans using bitcoin regularly?
Despite its legal tender status, bitcoin is not widely used in daily transactions. Most businesses and individuals still prefer the U.S. dollar due to its stability and familiarity.
What are the main obstacles to Bitcoin City’s development?
Key challenges include funding delays, technological barriers, public skepticism, price volatility of bitcoin, and the need for greater digital literacy among the population.
How will Bitcoin City be powered?
The city is planned to be powered by geothermal energy from a nearby volcano, supporting both its operational and bitcoin mining needs.
Is there local support for the project?
Reactions are mixed. While some locals welcome the potential economic benefits, others doubt the government’s ability to execute such an ambitious plan.
El Salvador’s Bitcoin City represents a bold vision for the future of cities, cryptocurrency, and economic policy. While the project has sparked global interest and local hope, it also faces significant financial, technological, and social hurdles. Whether it becomes a model for crypto-based urban development or a lesson in ambition overreach remains to be seen.
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