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Bitcoin City of El Salvador is an absurd political stunt



Steve Hanke criticizes El Salvador's plans to build a Bitcoin city, describing the initiative as an “absurd political stunt by a deluded dictator”.


The President of El Salvador , Nayib Bukele, announced on November 20, 2021 that he was planning to build a city with an economy based primarily on Bitcoin . The city is to be built near the Conchagua volcano in the southeast of the country.


El Salvador recently became the first state to use Bitcoin (BTC) as legal tender. Steve Hanke, an economics professor at Johns Hopkins University, criticized in a tweet on November 26th that funding the construction of a crypto city in a country with abject poverty and inadequate social services made no sense.


“Dictator Bukele announced plans to build a Bitcoin city ... This is an absurd political stunt by a misguided dictator. Why doesn't he focus on what Salvadorans really need, like access to health care? "


Bukule buys the Bitcoin Dip again

As part of the plan to fund the Bitcoin city, El Salvador plans to issue $ 1 billion in BTC bonds in 2022. Half of the money raised will be used to buy BTC, with the remainder going to the country's energy and bitcoin mining infrastructure . Hanke sharply criticized the plan:


"This form of casino financing will put Bukele in a mess with the International Monetary Fund (IMF) and the World Bank."


The IMF has already raised concerns about the introduction of Bitcoin as legal tender in El Salvador. The financial institution warned that the country's plans to buy more digital assets require “very careful analysis” of the impact on the country's financial stability.


When the Bitcoin price fell to a low of around $ 55,000 this week, President Bukele announced that the country was adding another 100 Bitcoins to its ever-growing Bitcoin inventory.


El Salvador bought “the dip”. It refers to a financial investment practice of buying an asset after it has fallen in price because one believes it is a cheap offer.


Hanke also railed in an earlier tweet about El Salvador's falling dollar bonds and indicated that Bukele wanted to “replace” them with BTC bonds. He wrote:


“However, a Bitcoin bond would offer lower returns, even if it comes with a higher risk. It looks like Bukele is trying to invent a new financial arithmetic ”


Economist refers to El Salvador as "Banana Republic"

The economist regularly criticizes BTC and crypto currencies. However, he is not the only one who has expressed criticism about Bukele's plans for a Bitcoin city.


Gold analyst Dan Popescu said El Salvador fits perfectly with the definition of a "banana republic ruled by an authoritarian regime". In addition, complained about the presence of foreign cryptocurrency companies in the Latin American country. He called it "economic exploitation" as foreign Bitcoin companies "work with local corrupt government officials". El Salvador is partnering with Blockstream, a crypto and blockchain tech company based in Canada, for the $ 1 billion BTC bonds.


According to Bukele, the Bitcoin city will take the form of the Bitcoin logo and be supplied with geothermal energy from the Conchagua volcano . Apart from a 10% VAT, residents of the city will not pay any other taxes.

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