Is Puerto Rico ready to be the next blockchain utopia?
Blockchain

Is Puerto Rico ready to be the next blockchain utopia?

Puerto Rico has had a difficult couple of years. Its economy has been in dire straits and last year Hurricane Maria devastated the island. The government faces a tough task in rebuilding its economy, but it is amid this backdrop that entrepreneurs are trying to craft a tech scene on the US commonwealth island with mixed results.

Blockchain in particular is on the radar of the island’s economic officials. The technology is very much a buzzword right now and regulators across the world are grappling with the best way to embrace it while also regulating it. It’s a delicate balance that a few countries and regions are leading the way in, but no one has perfected yet.

Puerto Rico has now established an advisory council, made up of public and private entities, with the stated aim of making Puerto Rico a go-to destination for blockchain startups and developers.

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Generally, Puerto Rico has been looking for ways to attract new investors to buoy the disaster-struck island, whether this is traditional investors or new crypto ones. In February, the island hosted its annual investment summit, which saw among the usual hedge fund managers, the arrival of new faces touting all things cryptocurrency.

Among them was Michael Terpin who runs the PR firm Transform Group, representing many cryptocurrency and blockchain startups. He told crowds at the conference that crypto enthusiasts like him were keen to take advantage of the island’s tax codes and set up shop in Puerto Rico.

For years the island has suffered from a brain drain and one of Terpin’s big promises is that these companies would bring jobs to the island, specifically highly-skilled tech jobs.

 

Tech island

There’s been a broader push to make Puerto Rico more accommodating to startups and tech businesses, such as the Parallel18 accelerator program, which backs startups founded on the island in the hopes of keeping them there and supporting newcomers as well.

Javier Malavé represents the Puerto Rico, Science, Technology & Research Trust (PRSTR), a non-profit tasked with developing Puerto Rico’s industrial and tech sectors and is involved in the running of Parallel18.

“Blockchain technology, beyond cryptocurrencies as its initial and currently popular application, is an area of interest for PRSTR, given its potential for creating new market sectors and providing new opportunities of economic growth for Puerto Rico,” he says.

“Being very much aware of the nuances of the blockchain technology sector, Parallel18 has taken steps to understand how to attract blockchain entrepreneurs and startups to its prestigious program.”

While the tax situation in Puerto Rico is attractive, it still lacks robust regulation and clarity on matters like token sales and securities, which is a common theme in many jurisdictions.

“For Puerto Rico, most of this regulatory clarity comes, and will continue to come from federal government agencies, such as the Security and Exchanges Commission,” explains Malavé. “States and territories, however, are also taking action to further clarify their definition and stance on what tokens do and do not constitute as a security. And how to treat these tokens for tax purposes.”

The advisory board established by the Department of Economic Development is one major step in providing clarity.

“At Parallel18 and PRSTR, we will continue to enthusiastically follow these efforts as we continue to support our blockchain entrepreneurship ecosystem and work towards developing a highly skilled workforce ready to take on the blockchain revolution,” he says. “As always, we remain open to constructively collaborate with government, within the scope of our mission and vision, in order to achieve these goals.”

 

Early birds

Puerto Rico has in fact seen blockchain and cryptocurrency enthusiasts flock to the island already in search of a more welcoming environment with varying results thus far.

These developers and entrepreneurs have dubbed the island “Puertopia”, which they see as a safe haven for their work and investment. One such enthusiast is Brock Pierce, a director of the US-based Bitcoin Foundation and cofounder of blockchain startup EOS. Pierce and his hyperbolic statements around the potential of blockchain were lampooned recently on a segment by John Oliver’s Last Week Tonight but investors and entrepreneurs like him are still bullish on blockchain’s future.

The cryptocurrency space is after all riddled with scams and overhyped products that often distracts from more legitimate efforts.

On the surface, it may look like these blockchain advocates are just trying to use the island to avoid taxes on the mainland. Pierce told the New York Times that this isn’t the case but one of his cohorts, Reeve Collins, a cofounder of crypto token Tether, said in the same article that he wanted to avoid taxes. “This is the first time in human history anyone other than kings or governments or gods can create their own money,” he said.

The locals are either opening their arms or scratching their heads though. A representative from the Conservation Trust of Puerto Rico, a non-profit that protects sites of historical and environmental importance said the island is like a “tax playground for the rich”. Outsiders can come in and try things out, but local businesses aren’t afforded the same welcoming.

Depending on what side of the argument you lie on, Puerto Rico will become a crypto utopia or will simply be taken advantage of.

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Jonathan Keane

Jonathan Keane is a freelance journalist, living in Ireland, covering business and technology

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