Late last year, Salvadoran President Nayib Bukele announced plans to build "Bitcoin City," a tax-free territory in the east of the country.
The city will use bitcoin (BTC) and will be powered by the nearby Conchuagua Volcano. According to Bukele, there will be:
Residential areas, shopping areas, services, museums, leisure, bars, restaurants, airport, port, train with no income tax, zero property tax, no contract tax, zero tourist tax and zero CO2 emissions.
Whether or not Bitcoin City comes to fruition, it joins a long and strange history of libertarian-inspired attempts to create independent cities and countries.
Bitcoin City
Bond villain Ernst Stavro Blofeld. Wikipedia Bitcoin City's generous financial incentives are intended to encourage foreign investment.
However, the plan was quickly derided by financial commentators as something "suitable for a Bond villain". There are doubts that construction will ever begin.
As the Australian Financial Review observes, Bitcoin City is likely nothing more than a "distraction peppered with Bukele's economic woes."
New Libertarian Cities
But Bukele is not the only one who is tempted to set up a new territory, with new (or not) rules.
In a 2009 TED talk, US economist Paul Romer argued that developing countries should partner with foreign countries or companies to create self-sufficient model cities.
Under his plan, host states would lease large tracts of undeveloped land to developed states, which would administer the territory according to their own legal systems. The city's residents would largely come from the developing state, but the city managers would be appointed by (and accountable to) the developed state. Residents could "vote with their feet" by migrating to or from the model city.
Romer argues that such cities would attract significant international investment because their legal architecture would insulate them from any political unrest present in their host state. Despite strong neo-colonial or neo-imperial overtones, several states considered adopting Romer's proposal.
The Honduran experience
In 2011, the Honduran Congress amended its constitution to facilitate the development of Romer's idea. Towns built in "special development regions" would not be subject to Honduran laws or taxes. Instead, they would be autonomous within a single legal framework.
Salvadoran President Nayib Bukele announced his Bitcoin City plans at a cryptocurrency investor meeting in November 2021. Salvador Melendez/AP/AAP After legal disputes over whether it violated Honduran national sovereignty, the plan was relaunched in 2015. Under the new plan, an investor building infrastructure at a site designated as a "zone of economic development and employment (ZEDE) will be given quasi-employment authority." sovereign The investor will be able to impose and collect taxes on income and property, and establish its own systems of education, health, civil service and social security.
Under the ZEDE Law, the president appoints a committee to oversee all model cities, as well as to establish ground rules and standards for investors to follow. Reflecting ideological support for the idea, the first committee, announced in 2014, was made up primarily of libertarians and former advisers to US President Ronald Reagan. In 2020, the first site was launched, but development does not appear to have started.
Sea
The Honduran plan implies that a country leases (temporarily or perhaps permanently) sovereign rights over its territory. Other projects sought to build a new country on the sea.
Since 2008, the focus has been on the California-based Sea Steading Institute.
Founded by American libertarian Patri Friedman (grandson of Nobel Prize-winning economist Milton Friedman) and initially financed by billionaire Peter Thiel, the institute sought to build habitable structures on the high seas, outside the jurisdiction (and taxes) of any state.
Although its website suggests that stabilizing the sea could bring significant benefits to humanity around the world, the main motivation is to make money without the regulatory burden. The funders are interested in the potential for Sea Steading to "peacefully test new ideas for governance" so that "the most successful ones can inspire change in governments around the world."
No city has yet been built. In 2017, negotiations with French Polynesia for the development of floating cities in its territorial waters stalled when community pressure forced the government to withdraw. Many have questioned whether “making it easier for the world's richest people to evade taxes” would really benefit the islands.
The Republic of Minerva
Other proposals have not bothered to ask anyone if they can collaborate. In the 1960s, several American businessmen sought to establish independent states on the coral reefs off the coasts of California and Florida. Both collapsed under pressure from the US government.
In the early 1970s, American libertarian Michael Oliver attempted to finance the construction of a new country, the Republic of Minerva, on a submerged atoll in the Pacific Ocean between Tonga and Fiji. There would be no taxes or welfare in his laissez-faire paradise.
To date, no plans have been made for new independent floating territories. shutterstock.com During the second half of 1971, Oliver's team barged sand from Fiji to raise the atoll above sea level and began construction of the base. Oliver envisioned the creation of 2500 acres of habitable land elevated eight to ten feet above high tide. Floating cities and a tourist center would also be built.
Progress proved difficult. Only 15 acres of land had been saved when Oliver's funds ran out. Neighboring countries were also watching with concern. In June 1972, King Tupou IV declared Tongan sovereignty over the atoll and expelled Oliver's team.
Oliver abandoned Minerva, but in 1982 another group of American libertarians attempted to reassert and restore the republic. After three weeks moored in the lagoon, they were expelled by the Tongan army. Today, Minerve is “more or less taken over by the sea”.
Maybe they should have invested in Bitcoin.
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