Friday 27 January 2023

Crypto millionaires are pouring money into Central America to build their own cities

A new class of crypto investors have bold plans to rebuild society from scratch. But their pet projects risk repeating the region’s long history of corporate colonialism.

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27 January 2023 - At The Banks - BCCR

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Q REPORTS (MIT Technology Review) Every day, a repurposed garbage truck ferries visitors up El Salvador’s Conchagua Volcano to an ecotourism retreat. The vehicle thunders along a cratered road, tossing passengers from side to side.

At the summit, they spill out into the sun-dappled forest and are rewarded with sweeping vistas of the deep blue Gulf of Fonseca.


The retreat is named El Espíritu de la Montaña (Mountain Spirit) to reflect the indigenous Lenca belief that a holy presence inhabits the dormant volcano, sometimes manifesting as a butterfly or eagle. Owner Luis Diaz began developing the site seven years ago.

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But the serenity he found there may not last.

The president of El Salvador, Nayib Bukele, announced in November 2021 that the volcano will become home to a glittering new Bitcoin City, a vast construction project to remodel virgin forest into a vibrant metropolis could soon be underway.

Renderings shared by the government show a circular conurbation emanating from a B-shaped central plaza and a technicolor street plan that looks like what you might see squinting into a kaleidoscope.

The idea is that the local economy will run on Bitcoin, and the city will be powered by geothermal energy from the volcano. The only taxes residents will pay will be on the goods and services they purchase.

To fund the city, El Salvador is selling US$1 billion worth of debt in US dollars as “Volcano Bonds.” Half of the money invested in the bonds will fund the construction of Bitcoin City and Bitcoin mining operations, and half will go toward buying Bitcoin—which could someday be used to pay off the bonds if the price of Bitcoin goes up.

Salvadoran finance minister Alejandro Zelaya said in early April that the bonds had attracted US$1.5 billion in demand and would be issued soon following delays. Most bonds are expected to be purchased by crypto investors—some of whom, if they pay up to US$100,000, may be granted Salvadoran citizenship.

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If it’s ever built, Bitcoin City will be a shining realization of crypto’s world-building aspirations.

The dream doesn’t stop there, though. A growing number of crypto investors are also trying to persuade other governments to create semi-autonomous zones that double as laboratories for economic experimentation, claiming it will stimulate growth and enrich nearby communities.

But in Central America, foreign investors have parachuted in with promises of prosperity before, only to grab land and extract value for themselves.

The region has a long history of economic exploitation—the most glaring example being the “banana republics” of the first half of the 20th century, when the United Fruit Company controlled vast swaths of land and seized political power in Honduras, Guatemala, and Costa Rica. More recently, “export processing zones” carved out for international garment-making companies have become home to sweatshop-style factories that have abused workers’ rights.

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Read the full article here.

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Reports by QCR staff

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