If you have read my articles before you’d know I am a very big fan of the sovereign individual, a book that I never get tired of recommending. This interesting work of art was written in 1997, yet it has been remarkably successful in both analyzing the trends in society and technology, while making extremely accurate predictions on where things would go.

One of the things the authors talked about was that for the first time in history, countries would need to compete with each other to attract their citizens. They would do so, much like companies launching a product do, by trying to offer the best deal, and lower prices. In this case, the main factor comes down to taxes and regulations.

This is what El Salvador is doing, a modest country from Latin America, which few people could locate in a map if needed to. This year they made an incredibly disruptive move by making Bitcoin legal tender, attracting serious international attention and investors. The Bitcoin crowd is not only super loyal towards those who wish to honestly further their cause of separating governments and the financial system, they are also getting richer year after year. A combination that makes them an incredibly tempting public to align your country with, specially if you are not a particularly wealthy nation to begin with.

Anyway, the next step for this small and ambitious nation is to build “Bitcoin City” near a volcano. The plan is to use the geothermal energy to power the Bitcoin mining facilities, and possibly the whole place. To fund this new venture they are offering bonds, with over 6% yield. Half of the money gathered will be used to buy and store BTC, giving the bonds some liquidity, while the other half would be used as investment on the city itself.

As an investor in the city you would pay no taxes for living there, only VAT (value added tax). The new “Pro-Bitcoin” path El Salvador has embraced plus such small taxes, and a whole town dedicated to Bitcoin enthusiasts is very likely to attract a ton of attention from this crowd around the world.

So there we have it, just like “The Sovereign Individual” author’s predicted over 20 years ago, countries are now starting to compete for their citizens. The book also explains how this will benefit much more the developing countries rather than the developed ones. The latter had enjoyed a time of abundance and have grown complacent, they charge amongst the highest taxes in history, offering very little in return. Already we are seeing the quality of life diminish in this locations, and governments becoming more and more intrusive in their citizens lives. 

We should expect to start seeing massive movements of people from jurisdiction to jurisdiction looking for the best possible deal. Some countries will go on the offence (like El Salvador) and offer massive opportunities. While some will turn defensive, instead of luring newcomers they’ll seek to penalize and punish those looking to leave. As individuals it will become a moral duty for us to vote with our feet, seeking to support those jurisdictions that have our best interest at heart.

If I’m correct, Bitcoin City is only the first attempt of emerging countries trying to make themselves more enticing for investors and settlers. This will most likely be the start of a trend that will benefit individuals more than anything. When companies need to compete, their costs tend to go down, this will happen to all governments around the world.

There are many implications that the new paradigm will bring, a lot of the social welfare enjoyed by developed countries will be going away. At the same time more money than ever will be in the hands of the private sector rather than the public one, which should mean an explosion in investments and high productivity.

The playing field is completely changed by this move El Salvador just did, of course it will take time for this trend to set and other to follow their lead. But the transition has begun, this is the important point I’m trying to make. Is yet another thing that we need to keep in mind while going forward. I hope this is useful for you, have a great day!