After the devastating Hurricane Maria wrecked Puerto Rico, a new breed of wealthy individuals from cryptocurrency investments flocked to the tax-friendly island. With the dream to build what they called Puertopia (now named Sol), the entrepreneurs are leaving California in masses to escape heavy state/federal taxes and with the hopes of rebuilding the society to function on the blockchain.
While this sounds great in theory, what happens to natives of the U.S. territory throughout this process? Is buying up tons of land and dodging taxes that the locals have to pay to create your own blockchain world considered colonialism?
Hedge fund manager Robb Rill certainly seems to think so. Rill, who runs a social group for those moving to Puerto Rico for tax breaks, says people call me up saying they’re going to buy 250,000 acres so they can incorporate their own city, literally start a city in Puerto Rico to have their own crypto world ¦ I can’t engage in that.
To understand the seriousness of this situation, let’s take a look at the definition of colonialism. Colonialism is defined as the policy or practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically. With this in mind, the fact that these ultra-wealthy blockchain enthusiasts are alarming tax-expats who moved to the territory in previous years, like Robb Rill, is concerning.
It’s not just that these predominantly English speaking, libertarian male expats who want to take over large segments of land to create their ideal dream cities in a Spanish speaking territory that is alarming. With the relatively new emergence of the industry, many locals feel these ultra-wealthy men are just there to evade taxes and are testing an experiment with a high chance of failing.
We’re the tax playground for the rich, said Puerto Rican native and Conservation Trust of Puerto Rico employee Andria Satz. We’re the test case for anyone who wants to experiment. Outsiders get tax exemptions, and locals can’t get permits. The Conservation Trust of Puerto Rico is a private, nonprofit organization dedicated to protecting and enhancing the environment on the island, as well as public education.
There’s Already A Lack of Electricity For Locals
It’s no secret that cryptocurrency mining consumes a lot of electricity. In a recent article by the Washington Post, electricity consumption from mining cryptocurrency in Iceland puts it at risk of running out of enough to supply both its residences and new business ventures.
While newer cryptocurrencies are implementing a protocol that’s energy-efficient, the most popular coins like bitcoin and ether have unsustainable protocols that aren’t easy to change. In fact, Ethereum founder Vitalik Buterin said in 2014 that implementing a more energy friendly proof-of-stake protocol that is effective is proving to be surprisingly complex. He was right: four years later, Ethereum still does not have a proof-of-stake algorithm.
In an interview with the NY Times, Puerto Rican business owner Richard Lopez said he and his friend wanted to set up a bitcoin mining rig, but power there is inconsistent and requires a lot of electricity. Now, it’s nearly 6 months after Category 4 Hurricane Maria Hurricane Maria, 16% of Puerto Rico’s residents still don’t have power, and 40% live in poverty.
Take these figures consideration: 215 kilowatt-hours (KWh) is used by miners in each bitcoin transaction, and at the time of writing there are nearly 200,000 transactions per day. Being that the average Puerto Rican home consumes 5,535 kWh a year (461.25 kWh a month), one bitcoin transaction is enough to power a home on the island for almost two weeks.
Moreover, because Puerto Rico is already lacking funds to ramp up electricity supply, and because the costs of mining rigs are too high for the average Puerto Rican (their median household income post-recession was $19,518), it’s unlikely that the majority of the population will be included in profiting from bitcoin mining ventures. What is likely is the increase in mining on the island from these crypto-utopia seekers goal of creating a blockchain town, which will put a strain on Puerto Rico’s already thinned-out electricity supply.
But What About an Increase in Spending on the Island?
Not all Puerto Ricans are against the idea of Puertopians entering the island. The aforementioned Richard Lopez said I think it’s great. Lure them in with taxes, and they’ll spend money. Keep in mind, this is not the first time Puerto Rico has tried to lure people to the island with and boost the economy with its Sun, Sand and Zero Taxes policy.
In 2015, the NY Times published an article stating that Puerto Rico had attempted in 2012 to lure financial services firms and other employers by being a domestic tax haven. Private-equity magnates, hedge funds, and investment advisers began moving to the island , but recovery never came. More and more companies and youth left the island, leaving behind a depleted workforce and tax base. Today, the territory owes more than $70 billion to creditors.
Some economists believe that the addition of new residents still wouldn’t be enough to rescue Puerto Rico from its deep economic woes. Brookings Institution in Washington economist Barry Bosworth believes the territory should expand the tax base, but instead Puerto Rico spends a lot of time and effort to attract a subpopulation that wants special treatment and is seeking to avoid paying taxes on the mainland .
Bosworth may be referring to people like Reeve Collins, who stated: No, I don’t want to pay taxes . If you don’t know Mr.Collins, he’s moved to the island to help build Puertopia and is the co-founder of highly controversial cryptocurrency Tether. Tether is currently being subpoenaed by the US government for failing to verify the monetary reserves it claims it has, and has often been accused by the crypto community as being a scam coin.
Conclusion
The Shock Doctrine: The Rise of Disaster Capitalism is a 2007 book by Canadian author Naomi Klein. In it, Klein describes the scenario of Disaster Capitalism , in which certain people exploit crises to get what they want from vulnerable citizens. These citizens are usually too emotionally/physically drained and distracted by the crises to resist powerful entities, and are misled into believing the saviors are there for the good of the people. Klein suggests that even relief from these disasters is somehow turned into a profiting system by these so-called beneficiaries.
What’s happened here is a perfect storm said blockchain entrepreneur Halsey Minor to the NY Times. While it was really bad for the people of Puerto Rico, in the long term it’s a godsend if people look past that. Another crypto capitalist on the island, Stephen Morris, said it’s only when everything’s been swept away that you can make a case for rebuilding from the ground up .
Their goals for the island are no secret, and they claim to come in peace. But it’s hard to imagine the benefits of a storm that ravaged the city, possibly killed more than 1,000 people, and destroyed the cities infrastructure, as being anything near perfect. However, without having personal knowledge of the intent of the people behind Puertopia, they could truly be attempting to use blockchain to recover the economy and show how blockchain can be used to create smart cities like capital city Taipei is attempting to do.
It is concerning that a few ultra-wealthy white men could potentially own so much land in Puerto Rico that it, in turn, may drive out native Puerto Ricans and the local culture. And with some of the leaders of Puertopia being controversial figures like Brock Pierce and Reeve Collins, one must question the true intentions behind the Puertopia vision. They certainly don’t have the cleanest records for this kind of stuff.
