By 2030, the worldwide cryptocurrency market could hit $5 billion, up from $1.49 billion in 2020. This could explain why we’re seeing growing numbers of crypto companies, exchange platforms and even individual crypto miners enter the marketplace. Because digital tokens don’t have a physical form, they don’t require a fixed location. So, where are crypto communities forming?
At a national level, it’s tough to find 100 percent buy-in because many countries worldwide have populations that benefit from a centralized financial infrastructure. Therefore, crypto hubs are instead appearing at state and local levels where they can find tax and regulatory benefits, diverse and inclusive communities, and stable energy grids.
3 Things You Need to Build a Strong Crypto Hub
- Open regulatory environments
- Stable energy grid
- Supportive local communities
1. Open Regulatory Environments
The number-one way to develop a crypto hub is to have a local government that supports crypto companies, exchanges and platforms from a tax and regulatory perspective. If crypto companies can operate without a heavy tax burden and crypto isn’t treated as a capital gains asset, then crypto companies will be more likely to put down roots.
For example, the island territory of Bermuda is set to become a global hub for blockchain and fintech since it’s a low tax jurisdiction, and they don’t impose income, capital gains, withholding or other taxes on digital assets.
Puerto Rico is another emerging crypto hub due to its low tax burden. Under the Puerto Rico Investors Act 22, people who inhabit the island for at least half the year are exempt from taxes on interest, dividends and capital gains.This means a company could cash out their profits from crypto and other investments without paying any taxes. (Interestingly, the mining and servers don’t have to be physically present on the island, which could strain Puerto Rico’s already fragile power grid. Only the individuals running the business and the business entity on paper need to be in residence.)
Crypto companies need a friendly legislative framework to keep their operations efficient and expenses low. Given the plethora of localities clamoring for crypto business, CEOs and founders are disincentivized from moving their companies to cities that recognize cryptocurrencies as assets or tax them at 25 percent.
2. The Power of a Stable Energy Grid
The second requirement for any crypto hub is a stable power source and energy grid. The mining process (where computers build crypto value by solving complex math problems) requires massive computing power. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining energy will reach 119 TWh in 2021, which is more than enough to satisfy the total electricity needs of the entire University of Cambridge for 924 years. With that, Bitcoin alone has overtaken Pakistan’s power usage this year.
If a local government wishes to attract traders, software engineers, and influencers to their city to work on crypto-related ventures, they should take a page from North Vancouver's book. The city plans to recover up to 96 percent of the energy consumed by Bitcoin mining. By supplying renewable energy through specifically constructed digital boilers, North Vancouver aims to combat the climate crisis while reaping the economic benefits of attracting crypto businesses — particularly Bitcoin mining ones.
What crypto companies should avoid at all costs is moving ongoing projects to locations, such as California, with continuous blackouts or unreliable, insecur, and high-cost power sources. These businesses should be on the lookout for hubs with greener, less expensive alternatives like solar or geothermal energy, natural gas or even nuclear power to ensure seamless operations.
3. Supportive Local Communities
Last but not least, a crypto hub can only grow within a supportive and encouraging community. Shared office spaces, events, conferences, and local government engagement create fertile ground to roll out successful projects. Diversity of thought, evinced by a vast range of mindsets that bring to the table different ideas and a rising creative, fertile environment for innovation, is vital to encourage a cohesive community of Bitcoiners, alt coiners, and Ethereum believers.
In fact, Austin is doing just that. The city is second only to the San Francisco Bay area for crypto hires per 100,000 LinkedIn members. With loads of rental office spaces, many crypto companies moved from New York and Los Angeles to Austin. Austin’s mayor also openly promotes a welcoming culture for crypto entrepreneurship. And Steve Adler isn’t the only mayor who’s recognizing the potential crypto has to offer for his city.
Miami’s mayor recently announced he’d give the Bitcoin yield to his citizens as a dividend from the staking of its own cryptocurrency, “MiamiCoin.” Steps like this show openness and support from local governments towards intra-state cryptocurrency development.
Lifestyle arbitrage can also play a crucial part in a crypto hub’s success. If you generate a high income through crypto trading but live somewhere with a low cost of living, you can automatically increase your take-home pay. For example, due to Bali’s vibrant tourism culture, the country provides a high standard of living while also allowing individual crypto miners to enjoy lower everyday expenses.
In the modern high-paced world, to maintain the flourishing economic and social development of each city and district, state and local governments need to face the future by leading with crypto.