Will cryptocurrency help or hurt Puerto Rico’s rebuilding efforts?
Thursday, February 08, 2018
Cryptocurrencies like bitcoin and ethereum have been all over the news lately, as they have generated lots of new wealth for investors. Now, a group of innovators has descended upon Puerto Rico in the hopes this tax-free haven will be the perfect home for their activities.
According to The New York Times, Puerto Rico has always served as an "unparalleled tax incentive: no federal personal income taxes, no capital gains tax and favorable business taxes — all without having to renounce your American citizenship."
Puerto Rico is hurting badly as it recovers from the destruction of Hurricane Maria, at the same time the cryptocurrency people have been looking around for a place to set up shop. But these cryptocurrency investors claim to be targeting the island for the benefit of all involved.
The grand vision here is a futuristic "crypto utopia" that embodies all of the technology's positive qualities. This would be "a city where virtual money and related contracts are all public." Some participants think that it's enough to simply take over the neighborhood of Old San Juan, while others are more into creating an entire city.
If you are wondering about support for this idea, the first ever cryptocurrency bank is currently being negotiated with local government officials.
Halsey Minor, who is moving his company Videocoin to Puerto Rico from the Cayman Islands, is quoted as suggesting that if all goes well, Hurricane Maria can be viewed as a blessing in disguise.
"While it was really bad for the people of Puerto Rico, in the long term it’s a godsend if people look past that," he told The New York Times.
"Godsend" is an interesting choice of words when we consider how devastated the island has been after the hurricane. The official death toll remains low at 64, but the latest news suggests that a recount is in order and that the number could grow to more than 1,000.
One of the most brazen aspects of this project lies in the fundamental anti-ecological elements of cryptocurrency technology: "The computer power needed to create each digital token consumes at least as much electricity as the average American household burns through in two years." That could be a hard sell as "each Bitcoin transaction currently required 80,000 times more electricity to process than each Visa credit card transaction."
On an island currently functioning on only 70 percent of its full power capacity, electricity has become the most important issue because it allows people to return to their normal lives.
And there has been much debate about how Puerto Rico should proceed in the days ahead regarding energy infrastructure. Some see a complex hybrid, or microgrid, approach between public and privately-owned energy companies as inevitable, while others take a staunch stand against the privatization strategy. With the amount of money circulating in cryptocurrency circles, will it be their money that is behind these privatization decisions?
Puerto Rico Governor Ricardo Rosselló has announced plans to privatize the Public Electric Power Authority (PREPA), but not everyone agrees with this approach. The main concern here is price gouging and an unstable grid that serves one locale well, but another poorly. Meanwhile, Rosselló will speak at a blockchain summit conference, called Puerto Crypto, in March.
With slow progress on the electrical grid repairs, some Puerto Ricans have been taking things into their own hands. For example, CBS News reports that residents in the Puerto Rican town of Coamo "have started restoring power on their own, pulling power lines from undergrowth and digging holes for wooden posts in a do-it-yourself effort to solve a small part of the United States' longest-running power outage."
It is difficult to reconcile bitcoin's energy needs with the Puerto Rican people's need to return to normal — as best as they can. To understand the scope of energy used, The Guardian reported that the entire bitcoin network consumed more power than the entire Republic of Ireland in November 2017.
Obviously, cryptocurrency promises a new infusion of capital into a struggling place, but given the level of energy use required here, is it the best fit for Puerto Rico?
We will be watching the situation develop, as Puerto Rican residents feel the presence of their new neighbors and power access eventually returns to 100 percent.
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