Inside The Mysterious Bitcoin City Billionaires Are Pouring Money Into | Insider News

Narrator: Billionaires are pouring money into this private city, built in one of the poorest, most dangerous countries in the world. It's called Próspera, and Honduras has virtually no control over it. The city runs like a business, with corporate income tax as low as 1%.

And you can pay for anything, even your taxes, using bitcoin. It's the freedom to do, the freedom to pursue your dreams with minimum artificial obstacles. Narrator: But when we visited last year, most of the offices and homes were empty.

And now, some locals who live nearby are afraid that wealthy businessmen might take over their land. Narrator: But who are the people pouring money into this experiment? And can you really build a city without a government?

Just off the coast of Honduras is the island of Roatán, which attracts thousands of tourists and deep-sea divers every year. Tucked away in this tropical paradise is Próspera. There are no road signs leading us to it, but the luxury architecture stands out from everything else.

Construction is nonstop. Behind me is Duna Residences, which is going to be the tallest building on Roatán. It's 14 stories high, and a studio apartment here is going to cost $80,000.

The city is part of a special economic zone created by Honduras to attract foreign investment. Are you guys going to get an apartment here? Passerby: Yeah.

Havovi: Yeah? Maybe? Thinking about it?

Passerby: Maybe, maybe. Narrator: But only about five people lived here last year. And that includes Jorge Colindres.

Jorge: I'm the mayor, or governor, of the zone. Here, it's an island, there's only one road, so there's no traffic lights, and that's, I really enjoy this. Narrator: He was appointed by the Honduran government to lead a committee that regulates the zone.

They collect taxes, run security, and approve any new laws here. He refused to disclose who else was on the board, but reports suggest many members are American and some have served in previous Republican administrations. To become a resident, Hondurans have to pay an annual fee of $260, while foreigners dish out $1,300.

Most are e-residents, so they can enjoy the perks, but they don't have to live here. There are some houses available on Pristine Bay. The sprawling 400-acre property was built before Próspera, but some owners incorporated it into the special economic zone.

There's a luxury resort, a golf course, and private residences. So, this is one of the biggest villas on Las Verandas. It is a two-bedroom villa.

It costs $1,700 a night to stay here. And check out the view. Narrator: But the normal public services you'd expect in a city aren't exactly there.

For safety, the city relies on a security-guard service. There's one private Montessorian elementary school that charges $550 a month for tuition. Around 120 businesses had registered here as of January 2023.

Jorge: In Honduras, it will take you somewhere around six months or more to get the proper licenses to operate your business. In here, you can get your business to an operational stage in less than two weeks. Narrator: The new companies include a gene-therapy startup, a dive shop, and a bitcoin education center run by Dusan Matuska, who moved from Slovakia.

Havovi: So, here is where we pay? Dusan: Chai latte. OK, go confirm.

You can choose to pay with bitcoin Lightning, which is the fast way to send bitcoin. So I click here, I scan the QR code, it shows me how I need to pay, I click "Pay," and in a couple of seconds, this is paid and this is accepted. So this transaction happened immediately, privately, outside of the regular financial system.

Havovi: All right, thank you. My chai latte is ready. My first bitcoin transaction ever.

Dusan: Nice. So basically, you can, in Próspera, live off bitcoin totally, but also you can pay your taxes inside of Próspera with bitcoin, and all the fees that are related to Próspera you can decide to pay in bitcoin as well. Narrator: And even though cryptocurrencies fluctuated wildly in 2023, Dusan is a believer.

Money without the control of government, control of some institutions, money that is uncensurable, uncorruptible, that cannot be seized by somebody. You're the only owner of that. So this is what bitcoin is.

Narrator: Critics say that unregulated transactions, low tax rates, and little to no government control could turn Próspera into a tax haven like the Cayman Islands, which is notorious for helping shell companies hide money. But perhaps the most controversial part about this city-state is the judicial system. Próspera has set up its own online court to settle disputes.

Jorge: It's populated with many legal experts from Europe, from Australia, New Zealand, Central America, and the US, of course. One of them is a former Supreme Court justice of Arizona. Narrator: Locals say this suggests that Próspera and its residents are above the law of the land.

The operating company, Honduras Próspera Inc. , is not even based in Honduras. It's registered in Delaware.

So far, it has raised $100 million in developing the city-state. The company refused to disclose a list of investors, but I met with Próspera's CEO, Erick Brimen, who told me the company vets everyone who wants to be here. Erick: Anybody who has a shady background is probably very dissuaded from opening a business in Próspera.

Unlike, let's say, when you open a legal entity in the US, which you can do online, to open a legal entity in Próspera ZEDE, you have to disclose the human beings behind the entity, you have to have a physical representative within the jurisdiction, a registered agent. Narrator: Erick moved to the island three years ago. Erick: What is now Próspera started for me as an idea that emanated from being from Venezuela and seeing that in my country of birth, there was a tremendous amount of poverty and very concentrated wealth and a huge separation between the two.

I wanted to find ways to get rid of poverty. It was first this idea of, how do you lift people up en masse? And then Honduras sort of raised their hand and said, hey, here's a legal system that, in effect, enables that vision to become a reality.

Narrator: For years, foreign investors had stayed away from Honduras because of corruption and political instability. So to attract them, the country approved the creation of special economic zones in 2013. One of the biggest advocates was former President Juan Orlando Hernández.

But in 2022, he was extradited to the US on corruption and drug-trafficking charges. And till today, some Hondurans suspect the zones were created for officials to hide illegal funds. Erick says that's hurt their reputation.

Erick: Unfortunately, it has suffered tremendously because of that. I do say, and I think it's unfairly so. It is not about any one person.

There's been a huge number of people involved in making this possible. Narrator: Próspera was the first to develop under the new law. But most residents of the nearby village of Crawfish Rock had no idea that wealthy investors were moving in to their neighborhood.

This road leads to Crawfish Rock, and this road leads to Próspera. And behind me, I counted, like, five security cameras to the entrance to Próspera, and there's a sign that says, "We create jobs for islanders. We believe in private property.

We comply with the laws. Join us. " Luisa Connor was born and raised in this tight-knit community of 600 people.

Narrator: Residents here grow all the food that they eat. Narrator: And in the summer, they make coconut oil from scratch. It's a simple way of life that Luisa says is at risk.

Narrator: She claims their actions have been hostile. Narrator: She's especially afraid of a law that says Honduras has the right to take over land to expand the special economic zones. But the CEO of Próspera says they have no plans of doing so and their own charter does not allow it.

Próspera not only has no plans of engaging in any form of expropriation, it doesn't have the legal capacity to do so. Narrator: But Luisa is not letting her guard down. Narrator: Others in Crawfish Rock are excited about the new city.

Like Virginia Mann, who owns her own catering service. She secured the funds to launch this business when she won a startup competition through Próspera. Virginia: Well, today we have island fried chicken.

Havovi: Oh, my God. Virginia: The best on the island. And we have homemade fries.

Narrator: She says the city-state has hired 30 people from the village, including the women who work in her kitchen, landscapers, and construction workers. They're not high-paying jobs, but in a country where more than half the population lives in poverty, any work makes a difference. Especially on this small island, where tourism is the biggest industry.

Roatán's Afro Caribbean community, called the Garifuna, depend on it. I visited their village, Punta Gorda, about 11 miles northeast of Próspera, and chatted with locals about politics and the economy. These guys were taking down a coconut and offered me some coconut water.

That's right? Yes, yeah. So this is Andrew.

You are? Casey. Casey.

Andy. You've heard of Próspera? Narrator: In all, Próspera has promised to bring 10,000 jobs, 90% of which are reserved for Hondurans.

But so far, only about 1,000 have been created. Now there's a new hurdle that could potentially stop Próspera in its tracks. In 2022, the country's new leftist president, Xiomara Castro, repealed the law that allows these zones, but existing ones cannot be shut down overnight because there is an international treaty protecting them for 50 years.

And if it's not honored, Próspera is ready to fight back. It has sued the Honduran government for nearly $11 billion. That was roughly two-thirds of the country's national budget in 2022, so it's a lawsuit Honduras cannot afford to lose.

Meanwhile, Próspera has plans to expand. They're building a new port in La Ceiba, a city on the mainland that's a two-hour ferry ride away. Here, crime is significantly higher.

Nearly every store in La Ceiba has armed security guards outside it, which is different from Roatán, which feels super safe. Narrator: Some people we talked to knew nothing about these zones. Narrator: Others have seen the bad press.

Narrator: But the verdict's still out on whether Próspera will be a zone of exclusion or opportunity.