With help from Derek Robertson
EL ZONTE, EL SALVADOR—Even before President Nayyib Bukele made Bitcoin legal tender last year, this surfing town had earned the nickname of “Bitcoin Beach” for its embrace of the cryptocurrency.
In a country pushing the global envelope by putting its treasury on the blockchain, this may be the place most committed to a crypto-centric future. Last week, “60 Minutes” broadcast a segment about an experiment, funded by an anonymous donor, that gives Bitcoin to families here and encourages them to re-spend it within the town.
Among locals, opinion of Bitcoin remains split, according to a handful of beachside conversations and the observations of Bitcoin enthusiasts. But another group here is all in: young, affluent foreigners.
El Zonte offers a look at what “embracing Bitcoin” could mean in practical terms for other governments that go down this route.
Its experience is different from Puerto Rico’s, which — as a U.S. territory — has become a haven for rich crypto investors who want to maintain U.S. residency while enjoying lower taxes and lots of sun.
El Zonte has become a stopping point for a globetrotting crowd that skews young, libertarian and male. They’ve found a pleasant beach town insulated both from the violence and instability that plague the rest of El Salvador, and from Western societies they view as increasingly “unfree.”
They are building a beachhead here, buying up property and convening formal meetups. Informally, many have taken to gathering each day at sunset at Olas Permanentes, a beachside restaurant.
It was there on Friday evening that I met Alex, who declined to provide his last name, and “Sam,” who declined to put even his first name on the record, citing privacy concerns. They took me to a nearby hostel and let me in on the view of the world from Bitcoin Beach.
Sam, in his early 30s, is French and Italian. He works as a consultant to decentralized finance projects that run on the blockchain. He moved here three weeks ago after getting fed up with the restrictions in Europe on people, like him, who refuse to get a Covid vaccine.
Alex is in his late twenties with long hair he sometimes wears in a bun. He left Sweden because he found the culture “oppressive.” He described onerous restrictions on dancing in bars there as emblematic of a country that lacked vitality.
Alex began buying Bitcoin a decade ago because he didn’t want banks to have his money. He is scouting El Zonte for land where he can buy a coworking space that will host people working to advance “the movement” to make Bitcoin a global currency.
Cryptocurrency has found something of a symbiosis with the preexisting surf scene in El Zonte. “The Bitcoiners learn to surf, and the surfers get orange-pilled by the Bitcoiners,” said Sam, using a slang term for being converted to a pro-Bitcoin worldview.
Both groups, he mused, like to take risks and are drawn to the margins.
Indeed, Bitcoin Beach would make the perfect setting for a sequel to the ’90s flick “Point Break,” about a gang of surfers who rob banks for the money, the thrill and the chance to critique the political-financial system. (Spoiler alert: They die in the end.)
The disillusionment with the mainstream and desire to “drop out” recalls another subculture, too. The Bitcoiners here are like Beatniks with a knack for international tax arbitrage.
Sam said that though he is a French citizen, he incorporated his business in Hong Kong for tax reasons. It helps, he said, that authorities in Western Europe and East Asia don’t understand each other’s systems or communicate well. It’s the sort of strategy once reserved for multinational corporations and the ultra-rich, now being adopted by millennials.
Sam’s next goal is to establish residency in a new country — perhaps El Salvador, perhaps Panama — to extricate himself from the French tax system completely.
As we sat inside a giant thatch-roofed hut, Alex rolled a joint and Sam talked a lot about “nation-state game theory.” It is a common belief among Bitcoiners that the cryptocurrency network presents national governments with a system of incentives that will inevitably lead many countries to institute laws that favor it — and even buy Bitcoin for their national coffers.
In the meantime, he predicts inflation in Western currencies will rise to something like 25 percent, and that the coming decade will bring geopolitical volatility unlike any he’s known in his lifetime.
Sam said he does not know if El Salvador will continue to appeal as a long-term haven, but if things go south, he can leave whenever he wants. By investing in land, Alex was preparing to integrate into the country’s financial and tax frameworks — and dreading the paperwork that would come with opening a Salvadoran bank account.
The lifestyles and aspirations of people like Sam and Alex offer a glimpse of the challenges Western governments are likely to face governing their own citizens in the years to come. They’re part of a swarm of hyper-mobile young people, loosely networked through the world of cryptocurrency, now scouring the world for the best places to build their “citadels,” a Bitcoiner meme that conjures the idea of building a life fortified against the vicissitudes of the outside world.
For now, Alex and Sam are still figuring out how to fully extricate themselves from the systems they want to leave behind.
Offered the chance of paying for his beer with cash, credit or Bitcoin, Alex chose greenbacks.
“The money I want to get rid of,” he explained.
Happy Tax Day!
You know, if you’re into that kind of thing. For the rest of us, meeting the IRS filing deadline is a grim-yet-inescapable duty — especially for the growing number of taxpayers trading in cryptocurrency, which was first addressed formally by the IRS in 2014. Since then the crypto industry has spent big money lobbying Washington over crypto tax reporting requirements, especially around provisions in President Biden’s infrastructure bill which will require crypto brokers starting next year to record and disclose transaction details, much to their chagrin.
For the average person, keeping track of crypto in one’s tax ledger is actually fairly simple: Cryptocurrencies are taxed either as capital gains, when one invests or spends crypto, or income, if one is paid with it. In both cases the amount taxed of course, depends on the corresponding U.S. dollar value of the currency in question. The IRS has gradually simplified the language about cryptocurrency on the 1040, as part of a more widespread effort to bring transactions under its all-encompassing bureaucratic penumbra. (There’s a straightforward explainer on the IRS’ website as well, for any crypto enthusiasts doing their own taxes this year.)
Just as the infrastructure bill was being passed, Sens. Ron Wyden (D-Ore.) and Cynthia Lummis (R-Wyo.) jointly introduced legislation that would loosen its definition of “brokers” to exclude miners and wallet providers, with the stated purpose of “protect[ing] American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe.” (The Pacific Northwest and Mountain West have become popular crypto mining locations for their abundant and relatively cheap energy.) The bill was introduced and referred to the Finance Committee, but no further action has been taken. — Derek Robertson
If the old maxim “cheaters never win” is true in the digital space, it’s only because there are no cash prizes for maintaining a lengthy Wordle streak. The homebrewed word-guessing game has had a meteoric rise since it launched last fall, culminating with its acquisition by the New York Times.
The same fundamental simplicity that quickly attracted millions of players also makes the game a popular and convenient subject for amateur programmers. It’s an efficient jumping-off point for understanding various AI-related concepts, which means — yes — that there are now a slew of AI-powered tools that help players cheat by quickly processing thousands of possible letter combinations to find the most likely next guess.
Here’s a robust one from Curiosity, a Munich-based productivity software company. Here’s a spartan, yet effective one of mysterious provenance. Here’s a YouTuber using a Wordle tool to explain information theory and the mathematical concept of entropy. Dozens of others clutter the pages of GitHub.
If you, or someone you know, is a Wordle cheater who would like to confess and have your sins absolved by DFD, email me at [email protected]. We won’t tell anyone (unless you want us to, thereby maximizing your virtuousness.) — Derek Robertson
Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]).
Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.
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