{"id":21113,"date":"2021-11-21T21:57:33","date_gmt":"2021-11-21T21:57:33","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=21113"},"modified":"2021-11-22T01:22:47","modified_gmt":"2021-11-22T01:22:47","slug":"el-salvador-a-1-billion-bitcoin-bond-to-set-up-bitcoin-city","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/21\/el-salvador-a-1-billion-bitcoin-bond-to-set-up-bitcoin-city\/","title":{"rendered":"El Salvador: A $1 billion Bitcoin bond, to set up &#8230; Bitcoin City!"},"content":{"rendered":"<p>The Latin American Bitcoin and Blockchain Conference (LaBitConf) ran this week in San Salvador! And President Nayib Bukele is announcing national policy at a Bitcoin conference again. [<a href=\"https:\/\/www.youtube.com\/watch?v=mNdPS940InI\"><i>YouTube<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.france24.com\/en\/live-news\/20211121-el-salvador-president-plans-bitcoin-city-financed-by-crypto-bonds\"><i>AFP<\/i><\/a>]<\/p>\n<p>El Salvador is going to issue a $1 billion bond, with the help of Blockstream and iFinex. And Bukele\u2019s going to build a special economic zone charter city running on Bitcoin.<\/p>\n<p>This bond has long been part of the plan for Bitcoin in El Salvador \u2014 though it\u2019s also Bukele throwing dead cats on the table as a distraction. Or perhaps dead goats, given the <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/06\/el-salvador-bitcoin-october-update-chivo-fraud-and-dysfunction\/\">Chivo network\u2019s failure so far.<\/a><\/p>\n<p>&nbsp;<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">They definitely didn\u2019t skimp on the production budget for Bukele\u2019s entrance \u2014 Metaverse avatar and all <a href=\"https:\/\/t.co\/VwspEggmLe\">pic.twitter.com\/VwspEggmLe<\/a><\/p>\n<p>&mdash; Sarah Kinosian (@skinosian) <a href=\"https:\/\/twitter.com\/skinosian\/status\/1462270313094336514?ref_src=twsrc%5Etfw\">November 21, 2021<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p style=\"text-align: center;\"><small><i>This video intro explains everything &mdash; Bukele is <a href=\"https:\/\/en.wikipedia.org\/wiki\/List_of_recurring_The_Simpsons_characters#Poochie\">Poochie!<\/a><\/i><\/small><\/p>\n<p>&nbsp;<\/p>\n<h3>The billion-tether bond<\/h3>\n<p>The International Monetary Fund said on Thursday 18 November that its <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/06\/el-salvador-bitcoin-october-update-chivo-fraud-and-dysfunction\/\">current discussions with El Salvador<\/a> are not, in fact, about lending the country the $1 billion that Bukele was desperately after \u2014 \u201cthis is an article IV discussion and the dialogue would be around policies that could, potentially, underpin an IMF program with El Salvador,\u201d said Gerry Rice from the IMF. [<a href=\"https:\/\/www.reuters.com\/article\/imf-el-salvador-idUSL1N2S91MT\"><i>Reuters<\/i><\/a>]<\/p>\n<p>So Bukele is going Bitcoin \u2014 and issuing $1 billion of \u201cvolcano bonds,\u201d as tokens on the Liquid Network, a proprietary permissioned blockchain run by Blockstream. [<a href=\"https:\/\/blockstream.com\/liquid\/\"><em>Blockstream<\/em><\/a>]<\/p>\n<p>(The <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/08\/24\/el-salvador-chivo-network-back-end-leaked-200-atms-bitcoin-trust-fund-law\/\">leaked Chivo Network infrastructure diagram<\/a> from August mentions \u201cLiquid\u201d via Athena, Chivo\u2019s Bitcoin ATM supplier \u2014 perhaps that was in anticipation of this bond plan.)<\/p>\n<p>Blockstream <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/07\/03\/news-binance-vs-the-world-vaneck-etf-robinhood-fined-africrypt-ponzi-mass-ransomware-attack\/\">proposed the bonds to Bukele<\/a> in July. Samson Mow at Blockstream blogged about the plan today. The proposal is to issue ten-year bonds, paying 6.5%. After a five-year lockup, El Salvador will start selling its bitcoins to pay an additional dividend. Buyers can buy in with as little as $100. [<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-07-02\/blockstream-proposes-digital-blockchain-bond-for-el-salvador\"><i>Bloomberg<\/i><\/a><i>; <\/i><a href=\"https:\/\/blog.blockstream.com\/el-salvador-to-issue-1b-in-tokenized-bonds-on-the-liquid-network\/\"><i>blog post<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-11-21\/el-salvador-plans-1b-in-tokenized-bitcoin-bonds-bukele-says\"><i>Bloomberg<\/i><\/a>]<\/p>\n<p>Mow says all the numbers work out if BTC hits $1 million within five years.<\/p>\n<p>The really good bit is that the new bond is being done via iFinex, in their new guise of Bitfinex Securities. Yes, it\u2019s the Tether crew \u2014 the same group of respectable businessmen who got fined millions this year by <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/02\/23\/new-york-settles-with-tether-a-wrist-slap-with-a-strong-leash\/\">New York<\/a> and <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/10\/29\/the-cftc-settlement-with-tether-and-bitfinex-42-5-million-dollars-in-fines\/\">the CFTC<\/a> for lying and lying and lying about the money. I wonder if US citizens will be able to go anywhere near these bonds.<\/p>\n<p>El Salvador doesn\u2019t have laws as yet to allow tokenised securities on a blockchain. But iFinex is helping draft them!<\/p>\n<p>That is: iFinex is helping El Salvador write the tokenised securities law that iFinex will be the first beneficiary of.<\/p>\n<p>Of the billion dollars from the bond, $500 million will be spent buying bitcoins, and $500 million will be spent building &#8230; Bitcoin City!<br \/>\n&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/21\/el-salvador-a-1-billion-bitcoin-bond-to-set-up-bitcoin-city\/bukele-bitcoin-city-official\/\" rel=\"attachment wp-att-21114\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-21114\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bukele-bitcoin-city-official.jpg\" alt=\"\" width=\"510\" height=\"315\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bukele-bitcoin-city-official.jpg 680w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bukele-bitcoin-city-official-300x185.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bukele-bitcoin-city-official-348x215.jpg 348w\" sizes=\"auto, (max-width: 510px) 100vw, 510px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h3>Charter cities<\/h3>\n<p><a href=\"https:\/\/en.wikipedia.org\/wiki\/Charter_city_(economic_development)\">Charter cities<\/a> are a Libertarian dream of how to do colonialism, but a bit more modern.<\/p>\n<p>The idea was first floated by economist Paul Romer in a TED talk in 2009. A poor country would attract investors from a rich country to an enclave with its own laws \u2014 and particularly laws about low taxes. This would attract libertarian captains of industry, and magically produce prosperity in short order.<\/p>\n<p>No attempts have got very far. In Honduras in 2012, the government went around the investors\u2019 backs, the charter city scheme was eventually ruled unconstitutional, and the investors\u2019 money went up in smoke. [<a href=\"https:\/\/reason.com\/2013\/05\/13\/the-blank-slate-state\/\"><i>Reason<\/i><\/a><i>;<\/i><a href=\"https:\/\/www.opendemocracy.net\/en\/opensecurity\/charter-cities-in-honduras\/\"> <i>Open Democracy<\/i><\/a>] Tim Draper\u2019s 2018 plan to <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2018\/09\/11\/news-the-sec-swings-into-action-marshall-islands-sov-papua-new-guinea-new-stablecoins-indian-crypto-legality-r3-and-ripple-settle-star-xu-of-okex-detained-kodakcoin\/\">take a chunk of Papua New Guinea<\/a> and put it under the complete legal control of his company Ledger Atlas never got off the ground.<\/p>\n<p>Libertarian charter cities have the same track record of success as <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/09\/21\/news-bitcoin-miners-cant-sell-their-bitcoins-sushiswap-theft-coinbase-lend-crypto-seasteading\/\">libertarian seasteading,<\/a> for the same sorts of reasons. It\u2019s the Galt\u2019s Gulch scam \u2014 rich libertarians are the suckers here.<\/p>\n<h3>Take me down to Bitcoin City<\/h3>\n<p>Unlike in June when Bukele <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/06\/06\/el-salvador-to-adopt-proprietary-payment-network-denominated-in-bitcoin\/\">announced Bitcoin would be legal tender,<\/a> this time the President\u2019s office has put out a press release on Bitcoin City. [<a href=\"https:\/\/www.presidencia.gob.sv\/presidente-nayib-bukele-anuncia-construccion-de-bitcoin-city-en-el-cierre-de-bitcoin-week-feel-the-bit\/\"><i>Presidencia de la Rep\u00fablica de El Salvador<\/i><\/a><i>, in Spanish<\/i>]<\/p>\n<p>Bitcoin City will have zero income tax, property tax, contract tax or city tax. The only tax will be VAT (sales tax) \u2014 half will be used to fund the city, and half to pay back the bonds.<\/p>\n<p>Coincidentally, El Salvador just put a 40% tax rate on foreign donations to non-governmental organisations who are deemed to be acting politically. [<a href=\"https:\/\/apnews.com\/article\/technology-business-san-salvador-el-salvador-caribbean-addf73d82596766a09760570170e4fbd\"><i>AP<\/i><\/a>]<\/p>\n<p>If you buy a certain amount of Bitcoin bonds, this will apparently count as investment for permanent residency, with a path to Salvadoran citizenship!<\/p>\n<p>(You will recall that Bukele <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/06\/11\/el-salvador-passes-its-bitcoin-law-and-its-a-tether-scam\/\">announced permanent residence for 3 BTC investment<\/a> in June. No laws or regulations to this effect are as yet in place.)<\/p>\n<p>As it happens, the government is trying to put through a new \u201cLey de Dominio Eminente de Inmuebles para Obras Municipales e Institucionales\u201d \u2014 &#8220;Law of Eminent Domain of Real Estate for Municipal and Institutional Works.&#8221; That could be useful for Bitcoin City. [<a href=\"https:\/\/www.elsalvador.com\/noticias\/nacional\/gobierno-promueve-ley-expropiacion-inmuebles-terrenos-interes-publico\/892038\/2021\/\"><i>Elsalvador.com<\/i><\/a><i>, in Spanish<\/i>]<\/p>\n<p>The city\u2019s construction will start 60 days after the bonds are financed \u2014 \u201cen los 60 d\u00edas posteriores al financiamiento se dar\u00e1 inicio a la construcci\u00f3n de la ciudad.\u201d I don\u2019t know whether that means when the bond is <i>fully<\/i> financed.<\/p>\n<p>On the other hand, Bukele has a track record of making splashy announcements with short deadlines, and delivering a failure.<\/p>\n<p>Look up Hospital El Salvador \u2014 the COVID-19 \u201chospital\u201d with massive design issues all the way through courtesy of Bukele cronies, that was only a year late. [<a href=\"https:\/\/www.elsalvador.com\/noticias\/nacional\/autor-diseno-hospital-el-salvador-no-aparece-registros-arquitectos\/900317\/2021\/\"><i>Elsalvador.com<\/i><\/a><i>, in Spanish; <\/i><a href=\"https:\/\/saludconlupa.com\/series\/la-segunda-ola\/el-salvador-el-nuevo-hospital-que-no-estuvo-listo-para-la-emergencia\/\"><i>Salud Con Lupa<\/i><\/a><i>, in Spanish; <\/i><a href=\"https:\/\/www.thelancet.com\/journals\/langlo\/article\/PIIS2214-109X(21)00048-6\/fulltext\"><i>Lancet Global Health<\/i><\/a>]<\/p>\n<p>It is all but certain that if the Bitcoin City project even breaks ground, then it will be a haphazard disaster, courtesy incompetent but politically trustworthy cronies hastily pushing out the most slapdash and dysfunctional nonsense.<\/p>\n<p>(I wonder if the Tories could see their way clear to lending Dido Harding to the project.)<\/p>\n<h3>The Chinese enclave<\/h3>\n<p>The Bitcoin City plan is a recycled version of a previous plan. The previous Salvadoran government did a deal with China to set up a charter city on the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Gulf_of_Fonseca\">Gulf of Fonseca.<\/a> The plan was to lease a large chunk of El Salvador to China \u2014 about 10% of the land area \u2014 for 100 years. China\u2019s goal was to build a port for North America \u2014 but one they owned.<\/p>\n<p>Here\u2019s a scan of a Chinese real estate developer\u2019s brochure about the project. [<a href=\"https:\/\/www.docdroid.net\/OHZXk0J\/proyecto-china-pdf\"><i>PDF<\/i><\/a><i>, in Chinese and Spanish<\/i>]<\/p>\n<p>Bukele rubbished the plan at the time. There\u2019s always a tweet: [<a href=\"https:\/\/mobile.twitter.com\/nayibbukele\/status\/1016525069680594944\"><i>Twitter<\/i><\/a>]<\/p>\n<blockquote><p>The \u201cZEDES\u201d project is the most neoliberal project proposed by a government in the history of our country. Yes, and the proposal comes from the second &#8220;left&#8221; government, in its last year in office. Just like that, privatize a territory. Amazing.<\/p><\/blockquote>\n<p>(\u201cZEDE\u201d is the Spanish acronym for Economic Development and Employment Zone.)<\/p>\n<p>The current Bitcoin City plan is in the same location, in the Gulf of Fonseca. Here\u2019s the circular city layout from the Chinese plan, and below it is the new project&#8217;s promotional graphic. A circle is the most geometrically appealing layout that fits that particular location:<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/21\/el-salvador-a-1-billion-bitcoin-bond-to-set-up-bitcoin-city\/china-el-salvador-charter-city\/\" rel=\"attachment wp-att-21116\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-21116\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/china-el-salvador-charter-city.jpg\" alt=\"\" width=\"413\" height=\"396\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/china-el-salvador-charter-city.jpg 826w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/china-el-salvador-charter-city-300x288.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/china-el-salvador-charter-city-768x736.jpg 768w\" sizes=\"auto, (max-width: 413px) 100vw, 413px\" \/><\/a><\/p>\n<p style=\"text-align: center;\"><small><i>The Chinese promotional brochure, p19<\/i><\/small><\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/21\/el-salvador-a-1-billion-bitcoin-bond-to-set-up-bitcoin-city\/bitcoin-city\/\" rel=\"attachment wp-att-21115\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-21115\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bitcoin-city.jpg\" alt=\"\" width=\"477\" height=\"227\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bitcoin-city.jpg 954w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bitcoin-city-300x142.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bitcoin-city-768x365.jpg 768w\" sizes=\"auto, (max-width: 477px) 100vw, 477px\" \/><\/a><\/p>\n<p style=\"text-align: center;\"><small><i>The official Bitcoin City graphic<\/i><\/small><\/p>\n<p>&nbsp;<\/p>\n<h3>Volcanoes! Is there anything they can&#8217;t do?<\/h3>\n<p>Bukele confidently asserts that the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Conchagua_(volcano)\">Conchagua volcano<\/a> in Fonseca &#8220;will power the whole city and will also power the mining.&#8221;<\/p>\n<p>That\u2019s geothermal power that hasn\u2019t been built yet. If it <i>was<\/i> built, then it could be used to replace some of the <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2021\/09\/29\/el-salvador-bitcoin-volcano-mining-starts-and-chivo-still-doesnt-work\/\">expensive electricity that El Salvador imports or produces with fuel oil.<\/a><\/p>\n<p>If Bitcoin hits a million dollars \u2014 as Mow is sure it will \u2014 the bond pays out handsomely. If it doesn\u2019t, Blockstream gets the land. That\u2019s a pretty sweet deal \u2014 though not so sweet for El Salvador.<\/p>\n<p>Note that real-world usage of Bitcoin by the populace of El Salvador doesn\u2019t seem to matter for this plan. Just as well, given that Chivo doesn\u2019t actually work reliably.<\/p>\n<p>I\u2019m still reasonably sure that Bukele and the bitcoiners each consider the other a sucker they are absolutely going to skin. It\u2019s possible that both will lose, of course.<\/p>\n<p>&nbsp;<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">I\u2019m going to write a novella where a disaffected American takes his 3 BTC and moves to El Salvador, only to lose it all in volcano mining. So he starts walking north and learns the meaning of life right before being shot at the border by the libertarian who intro\u2019d him to bitcoin<\/p>\n<p>&mdash; Troy Esquivel (@Troy_IRL) <a href=\"https:\/\/twitter.com\/Troy_IRL\/status\/1402730206905831424?ref_src=twsrc%5Etfw\">June 9, 2021<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>&nbsp;<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>The Bitcoin City plan is a recycled version of a previous plan to lease 10% of El Salvador to China.<\/p>\n","protected":false},"author":1,"featured_media":21114,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[21,38,1605,100,2305,2552,1357,902,2553,953,2307,1604,39],"class_list":["post-21113","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-bitcoin","tag-bitfinex","tag-blockstream","tag-china","tag-el-salvador","tag-gerry-rice","tag-ifinex","tag-imf","tag-labitconf","tag-liquid","tag-nayib-bukele","tag-samson-mow","tag-tether"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/11\/bukele-bitcoin-city-official.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/21113","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=21113"}],"version-history":[{"count":16,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/21113\/revisions"}],"predecessor-version":[{"id":21132,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/21113\/revisions\/21132"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/21114"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=21113"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=21113"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=21113"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}