Published: August 14th, 2024
The Central American nation of El Salvador has received a huge infrastructure investment that’s been earmarked for the buildout of its futuristic ‘Bitcoin City.’
The government announced in a press release this week that Turkish holding company Yilport will pour USD 1.62 billion in two of the country’s Pacific Ocean seaports. It will be the biggest infrastructure investment in El Salvador's history.
The money will flow through a joint venture company owned by Yilport and the Salvadoran government and will operate both seaports for next 50 years. A video statement shared by El Salvador President Nayib Bukele said the agreement began to take shape after a diplomatic visit to Turkey in 2022.
The first port to receive funding is Acajutla, which handles the majority of the country’s coffee, sugar, and balsamic salt exports. The second is La Union, which has been largely inactive for years but will benefit from its geographic proximity to the nearby Bitcoin City site.
El Salvador’s National Bitcoin Office tweeted that the seaport project will create ‘thousands of direct and indirect jobs’ while improving the quality of the country’s commercial infrastructure.
Max Keiser, a member of the Bitcoin office, tweeted that the Yilport deal was clearly a Bitcoin City investment. ‘Bukele's trip to Ankara paid off in a huge way!’
The idea for Bitcoin City emerged in November 2021 as a proposal for a self-funding, tax-free municipality. The new city would generate revenue from Bitcoin mining powered by geo-thermal heat from nearby volcanoes. Bukele unveiled a proposed architectural model of the city in April 2022, however the project has been largely dormant since that time.
While El Salvador forged ahead with crypto plans in 2022, Paraguay’s planned regulatory regime for the crypto mining industry hit the wall when legislators cancelled the country’s ‘crypto law’.
The legislation would have established a tax and regulatory framework for firms undertaking crypto mining in the country, but politicians decided to shelve the enacting bill after months of back-and-forth debate. The law suffered an earlier setback in August when President Mario Abdo Benitez vetoed the bill amid opposition claims that BTC mining consumed too much power and brought only minimal economic benefits to the country.
That move was then countered by pro-crypto senators who proposed a comprehensive rulebook to regulate the industry, which operates in a legal grayzone.
Fast forward to Monday, 5th December, when Paraguay’s lower house of parliament voted against enacting the bill, leaving it in legal limbo.
The proposed legislation would have capped electricity rates for mining operations while creating a consistent tax rate for the industry.
Electricity in hydro-rich Paraguay is plentiful and cheap, making it attractive to Bitcoin miners who consume it by the terawatt in order to keep the Bitcoin blockchain operational. But despite having the legislation sidelines, some of the country’s blockchain leaders weren’t unhappy with the result.
Luis Benitez, secretary Blockchain Association of Paraguay, told the press that ‘sanity had prevailed.’ He added that the crypto industry was working with lawmakers to educate them on how the industry should be regulated. The hope is that a better bill can be drafted that’s more aligned with the current state of blockchain technology and maturing crypto services like DeFi.
Want it means for the big mining outfits preparing to set up shop in the South American country remains to be seen. Canadian giant Bitfarms said last year that it would expand to the country thanks to a five-year power purchase agreement (PPA) that secured the price and volume requirements for the facility.
Also in 2022, Portugal’s reputation as a tax haven for crypto investors took a hit when the country's finance ministry announced that crypto assets will soon be subject to capital gains taxes.
The news marked a sharp change in the country’s stance toward crypto, where it previously cryptocurrency trades like cash transactions rather than investments, even excluding crypto from capital gains taxes by definition.
Mixed signals from governments around the world mirrored Bitcoin’s difficulties in 2022. In July of that year, financial regulators in Lisbon granted a license to Bison Bank, one of the country’s largest high street lenders to launch a new entity offering crypto custody and exchange services.
A press release announcing the launch said customers would have access to a wider range of products and services that are ‘in line with emerging trends in this new segment.’
Bison Digital Assets is also targeting institutional investors, family offices, and other high-net-worth individuals. The company hasn't said yet which cryptocurrencies it will support, though BTC and ETH along with stablecoins like Tether (USDT) and USD Coin (USDC) seem a safe bet.
Under the watchful eye of the Banco de Portugal central bank, Bison Digital Assets will have to abide by strict anti-money laundering and counter-terrorism rules.
It wasn’t the first crypto-friendly move made by Portuguese lawmakers. Before the capital gains tax announcement, Portugal was one of the tax-friendliest regimes for crypto investors in the world.
Proceeds from the sale of cryptocurrencies had been effectively exempt from taxation since 2018. Capital gains tax on other traditional investment activities sits at a whopping 28 per cent.
Portugal has also been the scene of some of the biggest crypto-industry events, including Solana’s annual Breakpoint Conference last year.
Across the Atlantic countries like Argentina and El Salvador stayed the course and have since made further moves to embed crypto in their respective monetary systems.
Buenos Aires-based Banco Galicia, Argentina's largest private bank, began offering clients access to trading services in four different cryptocurrencies, BTC, ETH, XRP and USD Coin. In 2021, El Salvador under Bukele became the first country in the world to make Bitcoin a form of legal tender.
