The First Blockchain Nation: Free Republic of Liberland

The blockchain nation is here. Groucho got there first. Eighty-five years ago, the comedy Duck Soupposited the Marx Brother as Rufus T Firefly, appointed leader of the tiny nation of Freedonia. The scriptwriters didn’t stipulate where the country was located, but the indications were that it was probably a Mittel-European state.

Eight decades on the self-proclaimed Free State of Liberland described as a “libertarian crypto Utopia floating on the Danube” marked its third anniversary in April this year.

The tiny nation, all of three square miles, is situated between Serbia and Croatia. Unlike its larger neighbours, which use the dinar and the kuna respectively, Liberland designated bitcoin as its national currency – although fellow cryptocurrencies Bitcoin Cash and Ethereum are also accepted. According to the Daily Telegraph, Liberland is “the nation that Bitcoin built”.

blockchain nation

The territory was originally part of Serbia until the end of the decade-long Balkan Civil Wars in 2001 when the borders were redrawn. However, Croatia refused to accept the land, known as Gornja Siga, and on April 13th 2015 Czech politician and former financial markets analyst Vit Jedlicka declared it to be an independent nation.

According to its leader: “Our country is about pushing the borders of liberty to the maximum – to maximise the liberty and happiness of our citizens.”

The country’s adopted motto is “to live and let live”. Liberland’s official website describes its form of government as “constitutional republic with elements of direct democracy”. Citizens can largely do as they please, with tax paid on a voluntary basis, and no restrictions imposed on smoking marijuana.

Queue for citizenship

While Liberland has yet to achieve any official recognition, the micronation reports that by the end of 2017 it had received 480,000 applications for citizenship. Of these, 100,000 came from the Middle East, 18,000 from the US and 5,500 from the UK. Its financial supporters include internet entrepreneurs, private equity and venture capital firms, thanks to its concept of voluntary taxation.

The website sets out three basic criteria for citizenship – applicants must be individuals who:

  • have respect for other people and respect the opinions of others, regardless of their race, ethnicity, orientation, or religion
  • have respect for private ownership which is untouchable
  • have not been convicted of serious criminal offences

 

Jedlicka was profiled earlier this year by the political weekly The New Statesman, which questioned how a country little bigger than Monaco or the Vatican expected to accommodate these impressive of new citizens.

The answer is that there are currently no plans for it to build any new city or even a town. Liberland intends not only to be the first libertarian state but also the first virtual one, existing mostly online. So state business is conducted via email, WhatsApp and Skype by the country’s 100 representatives from various locations. Liberland’s foreign minister, Tom Walls, resides near the Florida resort of West Palm Beach.

“Everyone who wants to have e-residency,” says Jedlicka, “can enjoy legal status and pursue their business freely.”

Not a tax haven

The country’s leader, who turns 35 years old next month, regards himself as a liberal with views similar to those of US politician Ron Paul, which include the least state intrusion possible. In a podcast, he described himself as an anarcho-capitalist; influenced by the 19th-century French economist and free-market advocate Frédéric Bastiat.

“In the Czech Republic there were many taxes and legislation that prevented progress, and ultimately I found it easier to set up a new country than to fight against it,” says Jedlicka. “So we decided to build the freest country on the planet using advanced technology like blockchain. We had to find a piece of land that he did not own, so we searched on Google and then Wikipedia.”

This year has seen Liberland develop its own legal system on blockchain technology and it marked its third anniversary on April 13 by launching its own currency called Merit.

Jedlicka rejects the notion that Liberland might follow Luxembourg as a tax haven for the wealthy and prefers for it to be known as a tax heaven, with citizens earning Merits in exchange commensurate with the amount of tax they volunteer to pay. “This currency can be exchanged for shares and you become a shareholder of the whole community,” he says.

Website www.inverse.com reports that contributions from Merit are used to fund what Jedlicka claims is “the most cost-efficient government ever.” In its annual financial report last year, Liberland earned $334,000 in operating income and $212,250 from cryptocurrency gains.

Voluntary tax donations accounted for $96,889, or 29% of operating income, with 53% of its funds coming from “strategic and larger investments”. It spent $292,000 to leave a surplus of $254,350.

A serious proposition

Liberland is still seeking new citizens. In March this year, Jedlicka opened its office in Serbia’s capital of Belgrade, which he described as a “linking factor” to attract visitors to both countries. He said that Serbia had approved the foundation of Liberland, while “Croatia considers us a kind of joke or mockery. It is actually very funny to create a new country, but we are not a joke and we are going to prove that.”

Jedlicka says that his newly-formed nation has no debt, low running costs, and is relaxed about its dependency on bitcoin and its peers, with the state budget distributed among almost a dozen cryptocurrencies

“Putting yourself at the mercy of a highly speculative and intangible asset might sound like a recipe for disaster, but Jedlicka has not let this faze him,” observes the Telegraph.

 

Indeed Liberland’s third anniversary in April was marked by a three-day conference on cryptocurrencies. It took place on a boat settlement and was co-hosted by the group D10e. Since 2014 D10e has organised more than a dozen conferences on decentralisation, focusing on the future of fintech, initial coin offerings (ICOs), the blockchain, the sharing economy, the future of work and disruptive culture.

 

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