Dispatch #63: El Salvador's Bitcoin City

Nov 26, 2021 5 min read

Dispatch

In this patch of your weekly Dispatch:

El Salvador takes Bitcoin plans to the next level
Powell confirmed as Fed chair, memes go brrr
In the Nexoverse: Whitelisting feature, $MATIC

The Big Idea

El Salvador Can’t Stop Its Bitcoin Innovation

El Salvador’s move to make Bitcoin legal tender would have already been one of the biggest crypto stories of the year but the government led by President Nayib Bukele has literally no chill.

Last Saturday, to conclude the LABITCONF in El Salvador, Bukele announced ‘Bitcoin City.’ The city is to be based at the foot of a volcano along the Golf of Fonseca. The government will locate a power plant to take advantage of geothermal energy from the volcano to power the city and Bitcoin mining.

We at Nexo are willing to support the President’s ambitious, yet highly necessary venture to establish a truly financially free place to live, so we offered El Salvador a credit line backed by their BTC bonds as well as help in this admirable endeavour. We’ll take the president’s retweet as a resounding “yes.”

The city is intended to be a beacon for Bitcoiners from around the world. It will feature no income tax, no capital gains tax, no payroll tax. In fact, the only tax will be a 10% sales tax. The city will be laid out in a circle around a central plaza with a Bitcoin logo. Restaurants, an airport, rail, and port infrastructure will round out the city.

As part of the plan, Bukele also announced the issuance of a $1B so-called “volcano bond.” The bond will be 10-year, US dollar-denominated, and will have a coupon of 6.5%. Half of the bond will be used to build infrastructure, while the other half will be used to increase El Salvador’s supply of BTC. What’s more, the bond will be tokenized on Liquid by Blockstream and available for exchange on Bitfinex.

The Bitcoin community was floored by the announcement. It has been variously heralded as the beginning of a new era of geostrategic competition for talent and is being seen as having implications for the relationship between emerging market countries and traditional financial institutions like the IMF.

Not everyone, however, is taking Bukele’s ambitious Bitcoin plans at face value. A few weeks ago, his moves led to large-scale protests over fears the cryptocurrency would bring instability to the country.

There is a lot of work and challenges between here and the realization of the ‘Bitcoin City’ dream, but boy what a dream it is.

The Latest In…

Nexo Security

Nexo’s military-grade security line-up just got another upgrade – the long-anticipated Whitelisting feature. In a nutshell, the opt-in allows you to make quick and secure crypto withdrawals to your trusted addresses and prevents you from sending funds to misspelled ones. Its sub-features, Extra Security and Cool-off Period, further protect you should an unauthorized party try to gain access to your Nexo account. You can activate the feature by going to the “Security” section of your Nexo account and navigating to your “Address Book.”

The Latest In…

US Regulation

Despite the short holiday week in the US there were two fairly significant events in the US regulatory sphere. The first was that after months of speculation, President Joe Biden made his decision on the Fed Chair. Jerome Powell will be returning for another term. This means, most likely, that the Fed will continue to chart its difficult path of not letting inflation run too hot, while also not raising interest rates too much to cause a reaction in markets. Whatever the case, crypto folks are mostly quite glad to have their Plan B.

The Office of the Comptroller of the Currency published an interpretive letter regarding the guidance of the previous OCC head. On the one hand, it was good news in that it didn’t roll back the Brian Brooks-era approvals for banks and financial institutions to interact with crypto and stablecoins. On the other, it does request that banks get approval from the OCC if this is the type of activity they want to engage in. Still, chalk that one up to a W.

The Latest In…

Nexonomics

Remember what’s purple, is the name of a midfielder, and has just been listed on Nexo? That’s right, that Polygon’s MATIC. The asset comes to Nexo with a special promo: until January 3, 2022, you get up to 20% interest when you buy MATIC on Nexo, paid out daily, of course. What do you need to know about Polygon before you rush to buy MATIC on the Nexo Exchange? Their multichain network works on top of Ethereum’s blockchain and provides an infrastructure for facilitating blockchain networks that can communicate with each other outside of Ethereum’s primary chain. Pretty dope, eh?

The Latest In…

Crypto Fundraising

Continuing a theme from last week, crypto markets have continued to be a bit rough and sideways at best. But, when it comes to dry powder, it is nothing but bull all around. DJ 3LAU’s new marketplace for digital assets that are connecting to musicians, Royal, has just announced a $55М Series A. The round was led by A16Z. Even bigger was The Information reporting that Pantera has raised $600М for its fourth fund.

More significant than the overall number was the fact that something like 75% of the fund comes from institutional investors such as pensions and endowments. This represents a massive new source of capital that is just unlocking and suggests that market conviction overall is increasing.

The Week’s Most Interesting Data Story

Which L1 Has the Most Developer Activity?

Boy, did this one stir up a heckuva lot of opinions… Tascha Che is a macroeconomics PhD who has been sparking some serious debate on crypto Twitter of late. The latest firestorm from her was a list of the layer 1 protocols ranked by their number of active developer contributors. Perhaps surprisingly, Solana had more than double the number of Ethereum. NOW, many were quick to point out that this was just core protocol contributors and didn’t include the full dev spectrum that builds applications on top of Ethereum and other protocols. It also doesn’t take into account private developer contributions. But as Tascha said “Do those criticisms have merits? Yes. But it'd be unwise if you let them dissuade you from seeing the big picture the chart is telling you, imo.” What do you think?