Paradise, Tax Not Included: The Creation of Crypto Islands and its Underlying Geopolitics

Attached to cryptocurrencies is the dream of libertarians to establish communities, cities, and perhaps even countries that serve as tax havens eluding the purview of watchdogs. Many within the industry — especially those who are extravagantly wealthy — have attempted to bring such fantasies to life, but most have failed to even come close to the vision they had initially wanted to achieve. Certainly, El Salvador is leading in this regard. Fairly recently, however, there has been a wave that is seemingly sweeping the crypto community as investors, venture capitalists, and the like have purchased entire islands in hopes of building the sought-after paradise that will serve as the crypto capital of the world.

Crypto in the Pacific

Those who wish to make this dream a reality have set their eyes on Pacific islands, in particular, primarily because of their dependence on tourism which was severely affected due to the prolonged pandemic. Additionally, island nations throughout the Pacific have loudly positioned themselves as crypto-enthusiasts: Tonga is already discussing the possibility of making Bitcoin a legal tender; the Marshall Islands has opened itself to decentralized autonomous organizations (DAOs); and Papua New Guinea entered into an agreement with blockchain firm Ledger Atlas in 2018. Similar circumstances are precisely what drove the small Pacific nation of Palau, specifically its president Surangel Whipps Jr., to sell NFTs in the form of digital Palauan ID cards for individuals looking to become “crypto-citizens.”

Palau’s move to offer digital residency — dubbed the Root Name System (RNS) — in February of 2020 starkly contrasted its stance on emerging technologies the year prior. In 2019, the rise of Palau Coin gave way to a crypto-scam token which led to the implementation of a strict moratorium on cryptocurrencies. The nation — filled with captivating beaches and untouched reefs — and its population of 18,000 was heavily dependent on tourism, but this was quickly flipped at the onset of the COVID-19 pandemic which was accompanied by stringent travel restrictions.

To keep itself afloat, the government came up with the RNS in partnership with blockchain company Ripple and blockchain research institute Cryptic Labs. Under the scheme, individuals are allowed to apply for a limited edition NFT ID card which may be used to appeal for a legal name change as well as open an online trading account for cryptocurrencies, among others. Investors serve to benefit the most from Palau’s RNS, however, this doesn’t automatically guarantee them a chance to reside, open a business, or even become a citizen of the Pacific nation, contrary to how it was advertised. It’s merely an NFT, for all intents and purposes.

A Look Into Crypto Islands

The Short-lived Cryptoland

In the same vein, Cryptoland in Fiji and Satoshi Island in Vanuatu are similar initiatives being pursued in the Pacific. The former was led by Max Oliver and Helena Lopez and later gained prominence in December 2021 for its 18-minute animated sales pitch posted on YouTube. “We quickly realized that it was practically impossible to convey this all with a PDF or something because it’s so abstract,” explained Oliver. “You have to see it rather than read it like the lambos, the Bitconnect scam memorial, the Crypto Kitties, things that we know people will get it if they see it. So after a lot of brainstorming, we came up with the idea of creating a 3D animation video. The film had to be awesome but also very accurate at the same time because we must be sure we can deliver.”

Early into its marketing, Cryptoland was introduced as a “paradise made by crypto enthusiasts for crypto enthusiasts” which also promised to “make crypto enrich a harmonious co-existence with the world energy of its surroundings.” The island’s layout was split into three main areas: Cryptoland Bay serving as a resort-working-hub hybrid; the startup village House of DAO which will incubate blockchain technology innovations; and finally, the exclusive residential area called the Blockchain Hills where one acre of land was to be sold as an NFT.

Following the release of its video ad, Cryptoland was flocked by the general crypto community with mockery as well as criticism to which it replied: “We have been victims of what seems to be a planned attack to harass, vilify and twist our work. We condemn all the false information and false accusations being spread about Cryptoland and invite those who are truly interested, to make their own research and politely ask us if they want to know anything about this amazing project.” Of course, the project was also involved in the sale of NFTs including 60 King Cryptolander NFTs which were valued at 319 ETH (over $1 million at the time) and 9,940 standard Cryptolanders at a price of 0.11 ETH (around $350 then).

Despite all the hype, the idea of Cryptoland flopped early in February for a number of reasons. Among them was the island’s small 600-acre size, which did not fit the ambitious blueprint that was presented in the video. It was also surrounded by controversy when Cryptoland replied “Mental maturity should be more than enough! ;)” to a Twitter user who asked what the age of consent would be on the island. More importantly, the project came apart when the Nananu-i-cake island in Fiji — which was the expected site of Cryptoland — was still up for sale during the time it was introduced.

The Up-and-coming Satoshi Island

Satoshi Island, on the other hand, has proven to be a more successful venture because the site — spanning 32-million square feet — is already owned by retired British property investor Anthony Welch alongside his partner Theresa. Prior to this, Welch had initially marketed Lataro Island — its native name — at $12 million as a wildlife nature reserve for rare giant coconut crabs. It was even described as being “covered in lush rainforests, together with a wonderful array of flora and fauna that’s been here for thousands of years undisturbed and will surely make anyone believe they have gone back in time.”

“This was the last place with coconut crabs, they [the local population] had decimated them absolutely everywhere else on Espiritu Santo [Vanuatu’s largest island nearby],” Welch explained. However, the investor was quick to turn away from the original plan to set his eyes towards the creation of a crypto island, even going so far as renaming it Satoshi Island — paying homage to the creator of Bitcoin, Satoshi Nakamoto. Today, the project promises to build “a true crypto-economy where everything will be paid for in crypto and all ownership on the island is represented with NFTs.”

Another important aspect that sets Satoshi Island apart from Cryptoland is the backing provided by the Vanuatu government for the project, particularly because of the opportunity to spur job creation. “The minister of finance was already interested in the idea of a digital economy and using blockchain technology when we spoke to him, so he was very excited about the idea of having our company and many of the brilliant minds in our industry call Vanuatu home,” explained Satoshi Island Limited consisted of Welch, Australian crypto entrepreneur Denys Troyak, Hong Kong-based architect James Law, Dappros founder and CEO Taras Filatov, Benjamin Nero who serves as the Communications Team Lead, and Vanuatu Investment Migration Bureau COO Daniel Agius, among others.

The team has already secured build permits to construct infrastructure on the island, which they plan to equip with the “latest and greatest sustainable technology.” Moreover, the founders noted that they have already received “50,000 applications for our free Citizenship NFT, acting as a whitelist to enter our Land NFT sale, while also permitting the holder to live on the island with many other benefits.”

However, only 21,000 investors — another nod to the 21 million Bitcoin limit — will make up the island’s population but each home on the island will be regarded as a “Satoshi Island Land NFT,” which may be traded down the line. Similar to the case of Palau, it’s important to note that NFT residency does not automatically equate to Vanuatu citizenship, which costs $130,000. An NFT marketplace is also reportedly under development, but the attention is still heavily drawn towards Satoshi Island’s private opening targeted for Q4 of the year with homeowners being “able to begin residing on the island” by early 2023.

The Caveat

While all these developments appear to be game-changing for emerging technologies, the social and environmental impacts that these projects could have should not be overlooked. Moreover, North-South exploitation is seemingly at play underneath the rhetoric of “techno-utopianism,” as developers — in crypto, NFTs, and blockchain — take advantage of the imbalances in data power while using Pacific island nations on the brink of financial collapse as sites for experimentation.

These “crypto-colonialists” offer hopes of economic empowerment as well as digital and financial inclusion to the Pacific in exchange for innovative solutions to the challenges that they face. Perhaps, what these developers are truly after is the establishment of a remote, tax-free paradise suited for the top 1%. The island nations, however, are quick to succumb to such promises. “This is all about economic freedom,” noted Palau president Surangel Whipps Jr. “Digital nomads roaming around the world. Why not come and be a resident of paradise?”

Will these projects truly champion Pacific island nations and settle their struggles? Or will they simply provide a sanctuary for those within the crypto community, particularly the wealthy, to remain outside the watchful eye of states? Is there a possibility to reconcile the two? Which would prove to be the better outcome? Ultimately, it is difficult to determine the intention behind the creation of crypto islands. For now, all there is left to do is to wait and see what will stem from these projects during their development and long after they have been established.

References: CoinTelegraph, VICE, Thomson Reuters Foundation News, The Guardian