😲 A $1 bn Bitcoin City!
El Salvador is raising $1 bn in Bitcoin bonds to build a Bitcoin City with no taxes. And its five-year price projection for Bitcoin is hyper-crazy!
Check this video out for a detailed breakup of the event 👇
Imagine a world with no taxes! Sounds like a dream. But before you start planning what you would do with all your extra money, just think how would such a city work?Â
Taxes serve a purpose. Without taxes how can the government better our lives?Â
Well, El Salvador has found an answer to this question. And like every other solution these days, this answer also hides behind a cryptocurrency. You guessed it. It’s Bitcoin. Bitcoin is the key to a tax-free future!Â
El Salvador's Plan
This September, El Salvador became the world's first country to accept Bitcoin as a legal tender. The country's President Nayib Bukele is a huge Bitcoin fan. He thinks that this move could attract lots of investments to the country. And being the first-mover could help the country reach new heights in the future. They even celebrated Bitcoin Week, which brought in several crypto enthusiasts together for crypto conferences and parties.
But that's not all. Bukele, who is a member of the "buy the dip" club, now wants to create a whole Bitcoin City. This city won’t just transact in Bitcoin, but will also run through investments in Bitcoin.
According to Samson Mow, chief strategy officer of Blockstream (a blockchain technology company), El Salvador plans on issuing bonds worth $1 billion. These 10-year bonds will work just like government bonds and give investors a 6.5% return.
But they are not your regular bonds. They are like the goose that will give golden eggs to El Salvador in future. Or so it hopes.
While you can invest in these bonds in dollars, your money will be invested in a very different way. Half of the money that El Salvador’s government raises through bonds will be used to build the infrastructure in the Bitcoin City and harness power to mine Bitcoin. Bukele believes that building the city's infrastructure will take around 300,000 bitcoins. El Salvador currently has around 1,100 bitcoins.
The other half of the bond's funds ($500 million) will be used to buy Bitcoin. And when Bitcoin is there, why need taxes? The city will have no taxes except a 10% VAT (Value Added Tax). This is the invisible tax we pay when we buy any product or service.
This 10% VAT is supposed to be adequate enough to pay for garbage collection and maintenance of public places.Â
Woah. But Bitcoin is a volatile asset. What if the price of Bitcoin falls? Why would El Salvador put all its eggs in the same basket?
Well, Mr. Mow predicts that the price of Bitcoin will go up to $1 million per BTC from $57,459 currently. This will give investors an annualised yield of 146%. The government also has a plan to ensure that Bitcoin prices do rise in the future.
The $500 million-worth Bitcoin that the government will buy will be stored for 5 years. Wondering how this lock-in period helps Bitcoin prices?
What it will essentially do is take $500 million worth of Bitcoin off the market. Now, Bitcoin is a cryptocurrency that is limited in supply. So, El Salvador believes that by limiting this supply further it can increase the price of Bitcoin.Â
And after 5 years, it will begin selling these bitcoins again and give people additional dividends from the returns.
Want to know the best part? The new Bitcoin City will be powered by geothermal energy from El Salvador's volcano. Yes, not only will it be tax-free but also pollution-free!
Want to shift to Bitcoin City? Well, you can. The government plans to issue the Bitcoin bonds in 2022. Invest in the bonds and you will get a permanent residence and El Salvador's citizenship.
Other countries might soon follow El Salvador's example. This means more and more countries will be holding Bitcoin for long periods of time.Â
This could not only raise the crypto's price to the moon but also bring some stability to the token.
Is El Salvador's plan too ambitious? Or is it really on to something? Let us know what you think on Twitter.Â
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