El Salvador and The Latest Bitcoin Maneuver

One country’s bid to control its narrative gathers momentum.

Screen shot from Twitter

Nayib Bukele, El-Salvador’s young dictator is planning to build a bitcoin city, which will be backed by the decentralized cryptocurrency.

In a move that might seem fool hardy to some or extraordinarily perspicacious to others, Bukele is staking his country’s fortunes to bitcoin.

This city will be powered by geothermal energy and with apart from value added tax, residents will be subject to zero taxation: no income or capital gains tax.

For this to work, the following steps will be taken:

1. The issuance of $1 billion in bitcoin bonds
2. A ten year bond in US dollars.
3. The coupon rate would be set at 6.5%, with no trades and payments for 5 years with bond sales taking place at the yield of 146%, thereafter.

In layman terms, It is akin to Nike manufacturing 100 limited edition air Jordan sneakers, with Mr. Salvador spotting a rare business opportunity, and then goes ahead to borrow $10,000 at 6.5% to purchase 5 pairs to keep at home for 5 years and once this time frame has elapsed, goes ahead to sell at $100,000, repays the bank and keeps the massive profits for himself.