Last year, El Salvador's government made Bitcoin legal tender, announcing the creation of Bitcoin City and providing tax incentives for its residents.
They also launched another solar-powered bitcoin mining project recently, which raised hundreds of millions of dollars in foreign investment.
El Salvador, one of the smallest countries in Latin America, has become internationally renowned after it recognized bitcoin as a legal tender in 2021, along with the U.S. dollar, which has the status of the national currency there. On the wave of national enthusiasm, El Salvador's President Nayib Bukele announced a few high-profile projects, including the city of the future dubbed Bitcoin City and bitcoin mining powered by volcanoes.
In the summer of 2022, the country announced another promising project. The government approved plans for a solar energy farm powering a bitcoin plant in El Gavilán village, within the rural municipality of Nueva Concepción.
The new solar power plant will have a capacity of 6 MW
The local citizens have different attitudes toward this project. Some have concerns about the impact of construction on the environment and natural resources, in particular about deforestation and increased water scarcity in the region. Others expect an increase in jobs, investment in local infrastructure, and large-scale electrification (many households currently remain unconnected to the general power grid).
Government and executive officials believe the project would encourage investment in the village's poor farming community and improve the quality of life for local Salvadorans. In addition, they expect to transport the surplus electricity to the national grid, increasing the country's capacity.
Who is the investor?
The project is financed by a Swiss consortium represented by investor Josué López, a Salvadoran living in Switzerland, who decided to invest in his native country.
It is an honour to be able to direct this project … I owe myself to El Salvador, and all the investments of my fund will be for the purpose of benefiting our beautiful country,López said on Twitter.
The investor said that he and his business partners plan to invest up to $200 million in a bitcoin mining project powered by renewable energy in El Salvador. The project has received initial funding of $15 million, while the remaining funds will come after the completion of each of the planned phases.
Raul Peña, the mayor of Nueva Concepción, supports the project and expects that it will reduce the local budget costs. He said that López promised that the area would get new roads and power lines to all the houses.
If we saw it as something that would harm us, then we would be the first to oppose itsaid Peña, who sees the project as a benefit for society and the municipality.
Launch of the first construction phase
The first piece of the foundation for a six-megawatt solar power farm, which will mine crypto on entirely renewable resources, was placed in June 2022. Now the works are proceeding according to schedule.
Milena Mayorga, the El Salvadorian ambassador to the United States, attended the presentation and unveiling ceremony.
Perhaps this is the largest private investment ever reported in Nueva Concepción, Chalatenango,noted Mayorga, adding that $200 million will be invested in the region.
Environmental concerns
The local Association of Water and Sanitation of Nueva Concepción estimates that the installation of a solar power plant could lead to the deforestation of about 74 acres (30 hectares) of area.
“This (forest) is a lung not just for the community, but for all the municipality,” said José Gilberto Salguero, president of Nueva Concepción’s Communal Development Association. “If we cut down the little that is left, in what state are we going to leave the municipality?”
The president of the Association noted his concern that the energy-intensive process of bitcoin mining may require a lot of water to cool the hardware. Farmers need water for irrigation systems, and water shortages increase the risk of crop losses.
The country-level Bitcoin experiment
he government of President Nayib Bukele believes that bitcoin-oriented policies help attract investment, reduce bank fees, increase the flow of tourists, and promote financial inclusion.
However, since El Salvador made bitcoin legal tender in September 2021, the value of the cryptocurrency dropped, discouraging potential investors and reducing the country's reserves in digital assets.
The Bitcoin City project, a megalopolis and tax haven for crypto investors with mining powered by an active volcano, has never come to fruition.
Statistics from the Central Reserve Bank of El Salvador showed that only 2% of remittances were made using cryptocurrency wallets during the past year.
The International Monetary Fund called on El Salvador to revoke bitcoin's status as legal tender, citing the financial, economic, and legal problems in the country. However, the government responded that they will stick to the experiment.
The successful launch of a solar power plant for bitcoin mining with significant foreign investment has added trumps to the members of the reform team led by President Nayib Bukele.
El Salvador's ambassador to the United States, Milena Mayorga, believes the development of the bitcoin economy “is giving the world confidence” in El Salvador.
There is much more coming to the country. This doesn’t stop,she said.
Local expectations
Most Nueva Concepción residents live on subsistence farming, raising livestock, and running small businesses. Many families rely on remittances sent from their family members working in the United States.
Fredis Escobar, 43, who runs a one-stop store in the center of Nueva Concepción, believes a new solar power project and investors will help small business owners.
“If there are more employed people in our municipality, there is more money circulating,” he said. “We’ll all receive some of that.”
Mayra Portillo, 36, an El Gavilan resident who makes about $4 a day cleaning houses, said she wanted to improve her family's living conditions but got rattled when she learned that the project could harm the environment.
If it’s going to negatively affect us, better not,she said.
Many residents said they had heard something about the project, but wanted to learn more.
If they help us with solar panels to have our own electricity, that would be a huge help,said Alex Santamaria, father of twelve children whose house is not connected to the power grid.
He thinks investors would be better off asking the community directly about their needs, and if they can help us in any way, the community will be happy.
