Crypto Creeps Into Croatia

Satoshi Nakamoto designed bitcoin to disrupt central banking, but one man – Vit Jadlicka, Czech politician, publicist, activist, former accountant – has an even more controversial plan for the blockchain: build a nation state – across the disputed land on the western bank of the Danube between Croatia and Serbia.

One of the biggest mysteries in the technology world of today is the identity of Satoshi Nakamoto, the computer programmer who invented the digital currency bitcoin. That’s because the name—Satoshi Nakamoto—is a pseudonym. It could represent a man, a woman, or even a group of people. And, since the cryptocurrency was created in 2008, no one has been able to figure out who Nakamoto really is. But beyond solving a longstanding mystery, experts agree that uncovering Nakamoto’s identity could have an immense impact on bitcoin’s economics and internal politics.

Vit Jadlicka has created a virtual state that runs on cryptocurrency donations and will, reportedly launch its own cryptocurrency in the coming months. According to The Telegraph, half a million people have applied for citizenship in Liberland – 5,500 of whom are from the UK.

Vit Jedlicka’s territorial claim for Liberland is entwined in the Croatia and Serbia long-standing border dispute in the area but its not smooth sailing at all since the legal loophole he reckons he found has, rightly so, not stopped Croatian officials from arresting him after trying to set up camp.

Jedlicka said for UK Telegraph this month that “the situation on the mainland in Liberland is still difficult as Croatian police illegally persecute all visitors and settlers. We are waiting for exoneration from the Croatian constitutional court but for now, our settlement has essentially moved to the river, where we host visitors almost on a daily basis.”

How keeping usurpers of land that has been in Croatia’s cadastre books for at least two hundred years can be called “illegal persecution”(as Jedlicka puts it) is only clear to Jedlicka himself, it seems. The cadastre-based boundary reflects the course of the Danube, which existed in the 19th century, before meandering and hydraulic engineering works altered its course. The area size of the territory in dispute is reported variously, up to 140 square kilometres (54 square miles), Liberland claims some 7 square kilometres.

While geography poses a problem for Liberland to drive a stake into the disputed land the current technologies available mean that it conducts its business over email and Skype and such among its representatives worldwide, of which there are reportedly about 100.

Liberland is reportedly close to launching a legal system on the blockchain, which works by ensuring citizens sign digital contracts that are recognised and stored by computers, similar to how bitcoin’s digital ledger keeps a tally of digital coins. Reportedly, Liberland will in April be distributing its own coin, Merit. All those who pay tax will receive Merit, effectively granting donors a stake in the country.

But what a speculative stake cryptocurrencies are! Putting oneself at the mercy of a highly speculative and utterly intangible asset does indeed calculate as a recipe for disaster. You pay real money, cold hard cash, for bitcoin and you get nothing to hold in your hands! Perhaps, this is what future of currency is about, not in my lifetime, though.

Whether Jedlicka is on a roller-coasted of delusional pursuits is as much a mystery as Nakamoto’s bitcoin ride. One cannot but wait and see – this is, after all, the 21st century where what we once called science fiction gathers more and more applied realities. Offering a kind of a haven for tax evasion Liberland is set to attract at last a fair chunk of business moguls who fear that their business will be stifled by European law.

As it happens Croatia has since February 2018 its first Blockchain and Cryptocurrency Association (UBIK), which is a self-regulatory organisation that has its goal in creating a crypto community, educating the public, and developing regulation in Croatia.

According to media reports the governing board of UBIK already met with the Central Office of Tax Administration in Croatia on Feb. 9 to discuss the issues covering the taxation of crypto as a capital gain, the regulations of Initial Coin Offerings (ICO), and the business of crypto mining companies. The crobitcoin.com portal writes that the members of the Tax Administration showed a willingness to openly engage with finding solutions to issues that fall under tax law.

The idea behind UBIK was prompted by the rising use of Blockchain in both Croatia and across the globe. Its founding members are made up of a variety of Croatian Blockchain enthusiasts, including Blockchain developers, attorneys specialising in Blockchain, and authors of Blockchain-related books, the Croatian Bitcoin Portal writes.

Today, generally, people are bored of hearing about Blockchain’s miraculous powers or they’re likely lost and confused. If you aren’t, you should be.

The blockchain ecosystem is weirdly wonderful, especially if you’re not directly involved, biting at your fingernails wondering if you’ll ever hold in your hands any cash you may have invested in bitcoins. Blockchain seems filled to the brim with idealists who want to change the world and get very rich, quick while, ideally, paying no taxes in the process. The promise of bitcoin was a new global financial system free from the influence of any state. Now, holding more than $23 billion in value, everyone from Silicon Valley Venture Capitals to the Chinese middle-class have a stake. But still, nowhere is it widely used as a legal currency of note.

In fact, far from freeing people from the oppression of the state, blockchains perversely promise the perfect tool for a fully auditable, tax compliant, cashless society. Similarly, the belief it is an anonymous digital cash has quickly vanished and we are now seeing a large number of analytics companies throughout the world, set-up specifically to work with law enforcement agencies, to police this new parallel financial system.

Whether Liberland will emerge as the first country to use cryptocurrency as opposed to cold hard cash, or not, is certainly a question the answer to which many cryptocurrency devotees will be keeping an eye on. Ina Vukic