Micronations Become Blockchain Powerhouses

Capitalising on their ability to rapidly draft and pass new legislation, micronations are leapfrogging larger nations to become crypto and blockchain hubs.

The emergency of blockchain technology as a revolutionary force in global economics has given small nations an unparalleled opportunity to become powerful hubs.

In the globalised digital economy, a nation’s economic power no longer depends on natural resources, large work forces or military might. Instead, it depends on the ability to rapidly embrace new technologies, nurture a favourable tax regime, and attract talented individuals from around the world.

The smallest countries, particularly in highly developed regions like Europe, are proving their ability to completely outpace their larger neighbours, by being able to quickly assess situations, formulate plans, and pass new legislation.


Malta a.k.a. ‘Blockchain Island’

A prime example of this is the tiny nation of Malta. Located just south of Sicily, in the heart of the Mediterranean Sea, the archipelago is about half the size of the US city of Tucson, at just 316 km2. A European Union member state, with an educated, mostly English-speaking population of just under half a million, it is already becoming known as ‘Blockchain Island.’

In July 2018, the Maltese parliament made history by passing three Maltese Bills regulating DLT & Blockchain, Crypto & Service Providers into law. In effect, this legislation created an environment in which businesses centred around these technologies could at last establish bases with full legal certainty and clarity.

Already, major crypto and blockchain business like BinanceZB.com and Okex.com have announced moves to Malta, and there are plenty of exciting start-ups like Chiliz opening up shop on the island.

Malta’s rapid action to embrace blockchain, DLT and crypto tech businesses obviously has a lot to do with its experience with iGaming. As of 2018 it was being reported that iGaming comprised 12% of the Maltese economy, generating €700 million and employing 9,000 people, with over 330 gaming companies calling the islands home.

Of course, this means that Malta already has good internet infrastructure, excellent transport links to the rest of Europe, and plenty of residents with a forward looking tech-centred outlook. Add to this the facts that most people in Malta can speak English – it being one of the official languages, alongside Maltese – and the cost of living, though rising, is still very competitive compared to other countries, and it is relatively easy to attract talent to the islands.

Given the benefits the iGaming industry has bought Malta, it is perhaps unsurprising that the Maltese parliament passed the new blockchain, DLT and crypto legislation quickly and unanimously. The government has also given full backing to the new Delta Summit – a large blockchain and digital innovation event.

In such a small country, where it is not unusual to bump into politicians and industry CEOs in bars and restaurants, everyone is aware of the benefits of progress, and there is no major regional divide, with all the resulting political and social grievances. This is in stark contrast to larger countries, where some regions and groups can be left behind – leading to ignorance, suspicion and obstruction.


Liechtenstein, the Crypto Principality?

If you thought Malta was small, the tiny Principality of Liechtenstein makes it seem massive. This 160km2 nation nestled between Switzerland and Austria is the sixth-smallest country in the world (smaller than Brooklyn).

With a population of under 40,000, Liechtenstein has more registered companies than citizens, and has long boasted a thriving financial sector, as well as high-tech industry. Though it is not a member of the European Union, it does function as part of the EEC and Schengen Area.

And, yes, you guessed it, Liechtenstein has a booming cryptocurrency and blockchain sector.

To illustrate the point, consider that when Yanislav Malahov – one of the people behind the creation of Ethereum, now the second largest cryptocurrency in the world – embarked on creating a new blockchain named Aeternity, he decided to base his new project in Liechtenstein.

As Malahov said in an interview with Forbes in March 2018:

“They’re not putting any financial incentives in place, but they’re making it really easy to incorporate a cryptocurrency business,”

Apparently, you can even open a company in the principality using Bitcoin or Ethereum, with not bank account required. Again, as with Malta, the nation also makes foreign entrepreneurs welcome, with a very forward outlook and attitude.

An advantage that Liechtenstein enjoys over Malta, its Mediterranean competitor is that, as a member of the European Economic Area, it enjoys financial passporting rights, without being subject to many of the rules of the European Union.

This explains why Liechtensteiner banks have been so willing to handle crypto investments and embrace ICOs, compared with their EU based competitors. The royal family is even reported to be considering using blockchain to administer their affairs, and even potentially diversifying some of their assets into digital tokens.

Vaduz, the tiny capital, now hosts regular blockchain events, and the nation is already home to crypto start-ups like ChainiumVimana and Liechtenstein Cryptoassets Exchange (LCX).

Again, the small size of the government, the open enthusiasm for cryptos from Crown Prince Alois, and the lack of regional frictions, means that legislation can be passed rapidly, giving this tiny principality a dynamic advantage over its larger rivals.


San Marino – Blockchain Not Crypto

An even smaller state looking to become a blockchain hub is San Marino. At just 61.2 km2, and with a population of under 35,000, this landlocked country is totally surrounded by Italy, but is an independent nation – indeed, it’s the world’s oldest republic.

In a joint venture with Estonian-based blockchain tech developer Polybius, San Marino Innovation is planning to develop infrastructure, regulations and expertise to enable the republic to become a key blockchain player.

As reported in Bitcoin Magazine in April 2018, San Marino’s Secretary of State for Economic Development, Adrea Zafferani, said:

“We are the world’s oldest Republic and we are proud to begin a transformation led by technology,

“We believe this partnership will have a significant impact on the economy, growing the innovation sector which is at the core of our development strategy. The Republic will also acquire a state of art set of regulations to become a world-leading blockchain hub.”

San Marino clearly intends to create a blockchain ecosystem with friendly legislation and a clear legal framework for companies to operate within, mirroring the Malta model, but the government has made it clear they are not interested in cryptocurrencies, which may put it at a distinct disadvantage.


Monaco – Glamour and Blockchain

And, things just keep getting smaller. Now we travel to the miniscule principality of Monaco – all 2.020 km2 of it. Sandwiched on a tiny strip of insanely expensive real estate between France and the Mediterranean Sea, it is the second smallest independent state in the world.

Due to a sheer lack of affordable office space, and prohibitive employment costs (very high social-insurance taxes in particular), it is unlikely to attract businesses on the scale of either Liechtenstein or Malta.

Monaco is nevertheless embracing the blockchain industry, building on its reputation as a glamorous destination for the elite, pitching itself as a conference destination and digital knowledge hub with events like The Monaco International Blockchain tradeshow.


The Age of the Micronation?

Of course, this was just a brief look at the way in which the blockchain and cryptocurrency revolution is enabling tiny nations to leapfrog the larger countries in creating friendly ecospheres and regulatory environments. Others small nations, from the Caribbean, to the Baltics are also making substantial strides in the same direction (updated, see: MALTA & VANUATU TO FORM ‘COMMONWEALTH OF BLOCKCHAIN ISLANDS?’ and MARSHALL ISLANDS TO LAUNCH NATIONAL CRYPTOCURRENCY).

What is clear, is that the political, legal and administrative systems of larger countries, even those with substantial pro-blockchain lobbies, simply cannot take sweeping, concrete action anywhere near fast enough.

Inevitably, the larger the nation, the more complex it is; it takes longer and more resources to educate policy and lawmakers, there will be more disparity between regional interests and more competition for resources and political priorities.

The large nations, rich in natural resources, manpower, industry and military power were the ones who could best take advantage of the 20th century’s economic opportunities, but in the 21st the tables have turned, and it is the micronations who hold the trump card of nimbleness.

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