SAN SALVADOR, El Salvador — Building on its reputation as the world’s “crypto capital,” El Salvador is banking on the newest form of digital currency to make the capital the first “Bitcoin City.”
The project was announced last week by bitcoin entrepreneur Oscar Benales, and was unveiled this week by Bank of America-owned project incubator the Sandbox Lab.
The idea of using new digital currency to foster economic activity is not new — see the city of Buffalo, New York and the region surrounding the City of Industry, California as well as the San Francisco Bay Area — but blockchain technology has been particularly transformative in El Salvador.
The technology behind “blockchain” allows a network of linked computers to operate as a collective “supercomputer”, without centralized authority.
The prototype project in a new “Crypto City” would use blockchain technology to set up a decentralized financial system. The bank will issue “Bitcoin Bonds” linked to El Salvador’s peso-ruble exchange rate and would be part of a government-backed “crypto currency.”
On Wednesday, virtual currency experts gathered in San Salvador to provide input on the project, with most of the suggestions on a bitcoin settlement.
Beyond currency transactions, experts said they support several elements of the city’s project. These include allowing “virtual valuables” to be deposited in special “crypto banks” and allowing foreign exchange — not subject to cross-border regulations — as long as transactions are performed in English.
In a related development, U.S. designating agency the International Narcotics Control Board asked the U.S. government to consider blockchain technology as a means of countering the illicit trade in narcotic substances in the Americas.
Blockchain is seen as a possible solution to help track and combat illicit drug-trafficking. Other countries worldwide have experimented with blockchain as part of their drug-tracking strategies.