Building a blockchain island in Puerto Rico

SAN JUAN—Is Puerto Rico any closer to becoming the “crypto haven” that blockchain entrepreneurs and investors once promised? The attendees of Thursday’s fourth-annual CoinAgenda Caribbean conference in San Juan certainly think so.

A mix of local crypto enthusiasts and tourists gathered on the island late last week to discuss Puerto Rico’s potential as a hub of blockchain investing and industry. Its speaker list featured heavyweight crypto luminaries who have spent considerable time and money in Puerto Rico already, such as Michael Terpin—founder and CEO of Transform Group, which runs the CoinAgenda conference—and Brock Pierce, co-founder of EOS software development firm Block.one.

Between the local crypto tax incentives, efforts for blockchain focused programming education, cryptocurrency banking developments, and philanthropic efforts, the Puerto Rico crypto community is convinced that the island can be a beacon of innovation for the industry.

Here’s why:

According to Puerto Rican tax attorney Giovanni Mendez, the island provides unique tax incentives for local entrepreneurs as a result of Puerto Rico’s Act 60.

During his talk at the event, Mendez said that this initiative provides the enticing benefit of 0% capital gains tax on crypto assets. US citizens who migrate to the island for over half of the days of the year do not need to give up their citizenship to qualify, since Puerto Rico is a commonwealth of the United States.

"I believe that the tax incentives are helping economic development. There needs to be added regulation for growth of the industry," said Mendez.

Michael Terpin, who was one of the first crypto investors to move to Puerto Rico to participate in the crypto capital gains tax-relief program, similarly expressed his optimism for the island. Terpin said during his CoinAgenda event that he believes Puerto Rico can recapture the title of Blockchain Island even with increasing competition from others such as Malta and Bermuda.

Crypto mining companies seem to agree. Coinmint, the largest cryptocurrency mining operation in North America, is all in on the island: “Coinmint is a Puerto Rico entity and our headquarters is in Puerto Rico. The senior leadership of the company has relocated to the island,” CFO Michael Maloney said at the event.

But Puerto Rico does face some challenges, as the founder of Puerto Rico's first and largest private equity and venture capital firm Advent-Morro Equity Partners, Cyril Meduna, explained.

“Companies that want to establish themselves in Puerto Rico end up seeking coders in other countries as there is a lack of talent in the area,” said Meduna, who moved to the island 20 years ago from Chile. “We are working on creating a full stack coding school that will help build human talent and lessen the dependency on tax incentives.”

Beyond the lack of local talent, one of the biggest obstacles that has impeded local blockchain industry growth in Puerto Rico has been the string of natural disasters, according to Gail Nolan, principal strategist for Invest Puerto Rico. “Disasters have caused companies to evaluate possible downtime costs and risks factors,” she said.

Despite the risks, a number of entrepreneurs and startup founders remain intrigued by Puerto Rico’s potential. Brock Pierce, former child actor and co-founder of EOS Alliance Block.one, might be the best-known figure in the crypto industry to migrate to Puerto Rico. During his featured fireside chat at CoinAgenda, Pierce likewise identified some of the challenges local businesses face.

“I met with the local government and identified regulatory uncertainty as a reason why more companies have not moved to the island,” he said. “The local market not being big enough has made it difficult for startups to raise money.” 

This falls in line with some of the questions that have arisen over the last year regarding the island’s future as a haven for crypto following a change in Puerto Rico’s leadership. Even still, Pierce said he remains bullish on Puerto Rico’s potential for growth.