In November 2021, the president of El Salvador drew a circle on stage—and declared it a future city. Not a metaphor: literally a circle at the foot of a volcano, with an airport, a port, and zero income tax. It was to be financed through digital bonds, powered by magma energy, and run on blockchain currency. Three years later, the city was never built, but the experiment has already entered textbooks—not as a utopia, but as a rare case where a state turned cryptocurrency into an instrument of sovereignty, speculation, and personal political mobilization all at once.
September 7, 2021 El Salvador became the first country in the world where bitcoin gained legal tender status—on par with the U.S. dollar, which has circulated in the country since 2001. The law took effect exactly 90 days after parliamentary approval, and in that time the government managed to deploy infrastructure that usually takes years to build: it launched a state digital wallet Chivo (local slang for "cool"), credited every citizen with $30 in BTC as a starter bonus, and installed over 200 crypto ATMs across the country.
The technical side resembled a startup launch, not a government program: wallet servers crashed on day one from the user surge, some ATMs failed to recognize faces (biometric verification), and citizens complained that their bonus $30 simply never arrived. But from a governance engineering standpoint, it was a brilliant trick: the state created the world's largest national crypto wallet network in one move—3 million installs in the first weeks with a population of 6.5 million. For comparison: PayPal took almost six months after launch to grow its first million users.
The economic logic of the law rested on two arguments. First: El Salvador receives about $6 billion annually in remittances from migrants (nearly a quarter of GDP), and traditional operators like Western Union charge commissions up to 10%. Bitcoin through Lightning Network promised to reduce it to nearly zero. The second argument was more ambitious: attract crypto capital and digital nomads to the country by offering them tax breaks and residency for investments of three bitcoins. Essentially, El Salvador was trying to become Caribbean Offshore 2.0, only instead of banking secrecy—blockchain transparency, and instead of yachts—volcanic energy.
Critics pointed out that most Salvadorans don't have smartphones, internet is unstable, and bitcoin's volatility makes it unsuitable for salaries and pensions. But Bukele was betting on something else: not on mass use of BTC to buy bread, but on symbolic effect. The law turned the country into a showcase where technology became part of the national brand—just as Estonia once bet on e-Residency, only here the bet was orders of magnitude bolder.
October 15, 2021 the government announced it had started mining bitcoin on volcanic energy. Not metaphorically: state energy company LaGeo allocated part of the capacity from the Berlin geothermal plant for installing mining farms. The first footage showed containers with ASIC miners set up right on the slopes of a volcanic region—visually it looked like cyberpunk set design, only instead of neon lights—steam from wells kilometers deep.
Geothermal energy in El Salvador is not exotic: about 25% of the country's electricity is produced from magma heat. It's a basalt substrate under the entire territory, where water pumped down 1500–2000 meters turns into steam at temperatures up to 300°C and spins turbines. Unlike sun or wind, a geothermal plant runs 24/7 without downtime—an ideal source for mining, where every second of equipment downtime means lost profit.
According to the government, the first satoshis from volcanic energy were born on October 1—with a video recording on Twitter, and over three years the entire pilot mined only about 474 BTC—not an impressive figure, but an important signal: the state not only legalized cryptocurrency but joined in its production. This changed the very nature of relations with the asset: bitcoin stopped being an external financial instrument and became part of the national energy balance. Roughly speaking, El Salvador began converting volcanic heat directly into digital gold, bypassing traditional export chains.
However, things didn't progress beyond this pilot. The announced large-scale mining farms that were supposed to become part of Bitcoin City's infrastructure were never built. LaGeo continued generating electricity for the domestic market, and mining remained a symbolic project—proof of concept, not an industry. Volcanic energy continued powering Salvadorans' refrigerators and air conditioners, not farms of ASIC chips.
Evening of November 20, 2021 at Bitcoin Week conference in El Salvador, Nayib Bukele took the stage with a presentation that looked more like a startup pitch than a government program. A circle appeared on screen—a perfect circle divided into sectors, with a central plaza shaped like the bitcoin symbol. This was Bitcoin City: a futuristic city at the Gulf of Fonseca, at the foot of the Conchagua volcano (La Unión region), with its own airport, port, railway line, and residential quarters.
The tax model looked like a hybrid of offshore and welfare state: zero income tax for residents, but introduction of VAT, where 50% of revenues go toward building the city's infrastructure and the remaining 50%—toward its maintenance. For investors, this meant the city would be self-financing after launch, without need for constant state subsidies. The cost of public infrastructure at the time of announcement was estimated at 300,000 BTC—at November 2021 rates about $17 billion, exceeding El Salvador's own annual budget.
The project was to be financed through issuing "volcano bonds" (Volcano Bonds) worth $1 billion. The mechanics looked elegant: bonds denominated in dollars, but half the funds invested in bitcoin, and the other half going toward building the city and geothermal infrastructure. Holders receive coupon income, and after five years—redemption rights accounting for growth in the bitcoin portion of the portfolio. Essentially, this was a bet that BTC would grow enough to cover both the debt and interest and construction.
But the bonds were never placed. The initially announced issue date—March 2022—passed without event. The government adopted a legislative framework for digital assets, created a regulatory structure, but in practice investors saw neither an issue prospectus nor trading platforms. By the end of 2024, Bitcoin City remained concept art: not one foundation, not one road, not one building. The land at the Gulf of Fonseca still belonged to private owners, and the circular plan existed only in presentations.
Why didn't the project take off? One version—resistance from international creditors. The IMF openly criticized El Salvador's bitcoin strategy and demanded revocation of BTC's legal tender status in exchange for a credit line of $1.3 billion. Another version is technically simpler: bonds required complex legal architecture (issuer, custodian, liquidity), and infrastructure for placing tokenized debt instruments in 2022 hadn't matured even in developed markets.
By the end of 2024, El Salvador's bitcoin reserve, according to tracking services, was valued at several hundred million dollars—the exact figure wasn't disclosed, but the state regularly published screenshots of purchases through the president's Twitter account. Bukele personally announced each purchase: 200 BTC here, 150 BTC there—turning state finances into a reality show with meme elements. When bitcoin rose from $30 thousand (2022) to $60+ thousand (2024), the reserve's unrealized profit looked impressive on paper.
But this was precisely unrealized profit—estimated value depending on price at time of calculation. Selling such a volume of bitcoin without tanking quotes is virtually impossible: crypto market liquidity is high for retail transactions, but state volumes require over-the-counter deals that themselves signal to the market a selloff. Moreover, the total cost of the experiment included not just BTC purchases but infrastructure expenses: development and launch of the Chivo wallet (government contract to a private contractor for the app and crypto ATMs—$4.7 million, and total deployment later estimated by the IMF at roughly 1% of GDP), ATM installation, citizen bonuses ($30 × 3 million users = $90 million), server maintenance and tech support.
The economic effect for ordinary Salvadorans turned out ambiguous. Studies showed most citizens used Chivo only to withdraw the bonus $30, then returned to cash dollars. Bitcoin's volatility made it unsuitable for salaries: receiving $500 in BTC on Monday and discovering $450 by Friday—not the best experience for someone living paycheck to paycheck. Small businesses, obligated by law to accept BTC, installed terminals but converted cryptocurrency to dollars immediately, offloading risk onto payment processors.
Bukele's political logic was built on something else. Bitcoin became part of a narrative about technological sovereignty—positioning El Salvador as an innovative country against traditional Latin American states dependent on the IMF and World Bank. When international organizations demanded abandoning BTC, Bukele doubled down: publicly bought bitcoin "on the dip," turning macroeconomic policy into a meme war with global institutions. This worked for the domestic audience: youth saw the president as a tech optimist, not another populist with subsidy promises.
But the financial sustainability of this model depended on one factor: will bitcoin continue to rise. If yes—El Salvador enters history as the country that first bet on digital gold and won. If not—the reserve becomes a loss, and the experiment becomes a case study about how a state can turn a budget into a venture fund with risk of total capital loss, without asking voters.
Nayib Bukele came to power in 2019 as an outsider—mayor of a small town who defeated two traditional parties that had ruled El Salvador since the end of the civil war in 1992. His campaign was built on anti-establishment rhetoric, personal branding, and aggressive use of social media. Bitcoin became a natural continuation of this logic: a technology that promises to bypass traditional institutions fit perfectly with the political style of a man who himself bypassed the party system.
In February 2020, Bukele stormed the parliament building accompanied by military forces, demanding approval of credit for fighting crime. It was a moment when democratic procedures collided with populist pressure—and populism won. In May 2021, his party gained a constitutional majority in the Legislative Assembly and immediately removed all Constitutional Court judges. The bitcoin law went from a video at a conference in Miami to a parliamentary vote in three days—without public hearings, without economic expertise, without debate.
This speed is not a bug but a feature of a personalist regime. Bukele runs the country like a startup founder: fast decisions, personal control, minimal bureaucracy. Bitcoin City, volcanic mining, digital bonds—all announced personally by the president via Twitter, often with memes and emojis. State policy turned into performance, where every decision is accompanied by visual content: Bukele in a baseball cap by the volcano, Bukele with laser eyes (crypto meme), Bukele buying bitcoin during a market dip.
Cryptocurrency turned out to be an ideal tool for such a governance model: decentralized technology that paradoxically strengthens centralization of power. Bitcoin doesn't require parliamentary committees, expert councils, or multi-year coordination—sufficient is one person's decision with access to the treasury. This is exactly the same logic by which 20th-century dictators nationalized oil or banks: control over a strategic asset becomes an instrument of political consolidation.
But unlike oil, bitcoin is volatile, and its value depends on a global market Bukele doesn't control. If the price falls—so does the experiment's legitimacy. If it rises—the president gains credibility that can be converted into political capital: new terms, new powers, new projects. Essentially, El Salvador turned the state budget into a bet on a volatile asset, where winnings are measured not only in dollars but in political points.
At the end of 2024, Bitcoin City still doesn't exist. No foundations, no roads, no residents. Volcano bonds weren't placed. Geothermal mining remained a pilot project. But the very fact of the experiment has already changed the global agenda: El Salvador proved that a state can use cryptocurrency not as a speculative asset for the Finance Ministry, but as part of national branding, energy balance, and political strategy.
For the crypto industry, El Salvador became a case that simultaneously inspires and frightens. Inspires because it shows: bitcoin can be not just an asset for hedge funds, but an instrument of sovereignty for small countries trying to escape control of global financial institutions. Frightens because it demonstrates how easily technological optimism turns into an authoritarian tool when decisions are made by one person without public oversight.
For El Salvador itself, the results are contradictory. The country gained global recognition, attracted several thousand crypto enthusiasts and digital nomads, reduced (at least theoretically) remittance commissions. But the economy remained dependent on the same factors as before 2021: migrant transfers, tourism, agriculture. Bitcoin didn't become a mass payment method, the city wasn't built, bonds weren't issued. What remains is a president who posts a screenshot of BTC purchases once a month, and a reserve that rises and falls with market cycles.
The question Bukele posed in 2021 remains without a definitive answer: can a state bet on a volatile asset and win not only financially but politically? El Salvador didn't become the utopia of Bitcoin City, but became a laboratory where cryptocurrency stopped being just technology and turned into a symbol—of sovereignty, risk, personal power, and faith that the price of volcanic energy converted into digital gold will someday pay for everything.