As new technologies are developed and begin to gain traction in local and international economies, there is always the question of trust in such “untested” technologies. Case in point; the recent crypto crash, where major digital assets had to give back their gains after a series of high-profile implosions.
While the fallout from the crash is still ongoing, so far exchanges FTX, FTX.US and BlockFi have all filed for Chapter 11 bankruptcy less than a month ago.
But despite serious setbacks, such as the crypto crash, there is still enough confidence in these technologies to push them forward. One such technology is Blockchain – an advanced database mechanism, or immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.
A blockchain database stores data (assets) in blocks that are linked together in a chain. Each “block” in a blockchain contains a record of transactions in a decentralized ledger. Together, the blocks form a “chain” in a peer-to-peer network.
A 2020 PricewaterhouseCoopers (PwC) report estimated that “blockchain technology has the potential to increase global gross domestic product (GDP) by $1.76 trillion over the next decade. This may have been one of the aspects that may have prompted the government to to legislate a series of tax incentives and benefits to attract crypto and blockchain developers and investors to move to Puerto Rico: promoting the island’s economy The fact is that the government expects their businesses with their move to Puerto Rico to increase economic activity and create jobs.
But the arrival of large investors from the Blockchain market to Puerto Rico, looking for the benefits and tax incentives offered by the government, could further exacerbate the cost of living situation currently affecting the island’s residents. Especially in the housing market for the island’s economy.
According to Alana Mediavilla, founder and CEO of Filmkik, a Blockchain production company, rapid economic growth fueled by investment can cause real estate prices to increase as there are more people with greater resources and greater purchasing power.
“Without a doubt, I feel that Puerto Rico could well become a ‘hub’ (Blockchain center), but becoming a ‘hub’ comes with a specific set of problems, such as those affecting Silicon Valley (in California), where the houses are very expensive. A lot of things are happening there because a lot of people are making money. That’s why they raised the rent. We already have a similar problem in Puerto Rico,” Mediavilla said.
“It would be good for Puerto Rico to be aware that this is a potential problem … with that kind of growth, rents will go up,” she added.
Mediavilla, who moved her business from California to Puerto Rico to take advantage of the tax incentives, acknowledged that she has so far not experienced the promised financial relief due to the high cost of living on the island.
“It hasn’t been as cost-effective as I thought it would be. “Last year I ended up paying federal taxes in California and state taxes in Puerto Rico because the incentive wasn’t in effect until this year,” Mediavilla said. “To be honest, I haven’t seen it [an economic relief], in addition, things here are more expensive in the supermarket. It is not cheap to live here.”
However, the businesswoman assured that Puerto Rico has the potential to attract investors from Web3 or Blockchain, and Puerto Ricans have the opportunity to work with international markets while living on the island.
The entrepreneur called on the government to take measures to promote economic growth and social development by guaranteeing access to affordable housing for citizens.
Despite acknowledging that the incentives have attracted investors to the island, digital marketing and social media strategist Juan Carlos Pedreira highlighted the importance of training local youth for the world of Blockchain.
“Of course, these tax incentives have helped many people working on Blockchain projects to move to Puerto Rico. But the most important thing that needs to be done still remains: how can we include local youth, who are currently studying, so that they can be part of that ecosystem,” Pedreira asked.
Pedreira further argued that the government in alliance with investors should promote the development of local start-up companies.
“Even though the government through these tax incentives made it possible for a large number of these Blackchain entrepreneurs to come and live in Puerto Rico, it’s still important to see how to go beyond these people who just move here and promote that they invest in companies that are being developed in Puerto Rico,” Pedreira said
He went on to say that “beyond companies moving to Web3 or Blockchain, capital needs to come in and invest in companies that are developing in Puerto Rico. I don’t think we’re at that point yet, but it’s an area of opportunity for economic development .”
Meanwhile, Department of Economic Development and Commerce (DDEC, for its Spanish acronym) Undersecretary Iris Santos said Puerto Rico is already becoming an international center for Blockchain development.
“Puerto Rico has great potential to become an international hub in the Blockchain industry. This is possible thanks to initiatives already in place that provide unique tax benefits. From what I can see, I think it has already started,” Santos said.
The government official’s remarks came as part of the first edition of Puerto Rico Blockchain Week, sponsored by the Puerto Rico Blockchain Business Association (PRBTA), in partnership with Metaverso, CoinAgenda Caribbean, Limitless and Invest PR.
