In March of this year, Costa Rica’s former government proposed a law to tax cryptocurrency purchases and gross sales. This law did not pass, meaning that Costa Rica does not subject cryptocurrency gains to the Value Added Tax (IVA) or income tax. According to current Costa Rican regulations, this type of asset is not classified as a currency by the Central Bank, and therefore is not taxed as such.
Today, cryptocurrencies in Costa Rica are considered legal to use but the official policy of the Costa Rican Central Bank is that Bitcoin and other cryptocurrencies are not backed by laws and will not be protected. Still, cryptocurrency use is growing in popularity in Costa Rica, which is considered one of the few crypto-friendly countries in the world so far and an early adopter of crypto on a societal scale.
There are a significant number of businesses that already accept cryptocurrencies as a form of digital payments, many of which are located in our South Pacific region of Costa Rica thanks to the blockchain movement known as Bitcoin Jungle. And as more buyers are looking to fund their real estate purchases in Costa Rica with Bitcoin and other cryptocurrencies, we want to share with you what is possible with crypto in Costa Rica — and where there are still drawbacks.
Using Cryptocurrencies In Costa Rica
Costa Ballena is home to the pioneers of a new Bitcoin payments ecosystem that has sprung up in this growing tourist region. At the Uvita farmer’s market, some vendors are earning up to a quarter of their sales through the new Bitcoin Jungle wallet. This form of digital payment is being popularized and facilitated by the Bitcoin Jungle movement, which helps Costa Rican merchants save on credit card fees, among other touted benefits of using the blockchain.
Around fifty Costa Ballena market vendors and thirty stationary businesses have signed up to use the Bitcoin Jungle wallet since it was launched at the end of 2021. The wallet app currently has around 1000 active monthly users who can use the digital payment method in businesses such as Cafe Mono Congo in Dominical, Sibu Cafe in Uvita, and L’Epicerie in Ojochal, among dozens of other locations in this region.
Skeptics have long rejected crypto payment systems because of slow transaction speeds and relatively high costs. But Bitcoin Jungle’s wallet runs on the Lightning Network, which has made transactions faster and cheaper.
The Lightning Network is an open-source Bitcoin development platform with features like a GPS map showing locations where Bitcoin is accepted and where users can find contactless near field communication (NFC) payment capability.
Thanks to these pioneering efforts in bringing blockchain into every day transactions, in July of this year, Bitcoin enthusiast, Eugenio, says he was able to go on a vacation across Costa Rica only using Bitcoin, aside from filling the car’s gas tank prior to departing.
Eugenio documented his experience on Twitter, saying that he was able to vacation to the towns of Dominical, Uvita, and Ojochal using only Bitcoin. He detailed a number of visits across the country that accept Bitcoin through the Lightning Network. Many of the places Eugenio visited were happy to accept Bitcoin for payment and even asked whether he wanted to “pay with Lightning or on-chain.”
Costa Rica’s capital, San Jose, became the third city in the world to have electricity in 1884, and Eugenio believes that Bitcoin is a far superior technology in its potential impact on society.
Twitter founder and CEO of Block, Jack Dorsey, follows Bitcoin Jungle on Twitter and is said to have visited Costa Rica nine times because of his affinity for what is happening in Costa Rica’s crypto-sphere. There is some speculation that Dorsey is in Costa Rica to see if there is any possibility of this becoming the second Central American nation to formally undertake Bitcoin as legal currency.
Cryptocurrency In Costa Rica Real Estate
Since cryptocurrency is not yet officially recognized as legal tender for public transactions, buying and selling real estate with cryptocurrency or the proceeds from selling cryptocurrency is not possible within Costa Rica. Due to strict money laundering regulations, escrow companies must do intensive due diligence on the source of the proceeds and cryptocurrencies are not legally traceable in Costa Rica.
However, as more potential buyers of real estate in Costa Rica look to use their cryptocurrency assets to fund their purchase, Costa Rica’s government is working on building the regulations to make this method of payment available. In the meantime, crypto-investors are finding other avenues to buy physical assets in Costa Rica for their digital ones. This may involve direct transactions in crypto in exchange for property shares or other creative solutions currently being worked on to make the growing number of crypto-dividend deals go through.
What Is “Crypto”?
Cryptocurrency, or “crypto” as it is commonly referred to, is a digital form of currency used to exchange for goods and services that is protected using cryptography. There are over 40,000 different cryptocurrencies being publicly traded today, the most popular of which is Bitcoin. This household name cryptocurrency made its astounding rise from just over $100 in 2013 to over $68,000 per share at its peak.
Individuals can obtain a cryptocurrency by purchasing it via another form of legitimate currency, trading for it, or by “mining” it.
Mining Bitcoin In Costa Rica
“Mining” is the term used to describe the creation of new cryptocurrencies while simultaneously validating existing transactions. Mining requires a massive, decentralized network of computers that verify and secure crypto transactions. Such verification is essential to reduce fraud and maintain user confidence in crypto.
Mining requires an enormous amount of computing power, and that consumes high amounts of electricity. Costa Rica produces almost all of its electricity from renewable resources: water, wind, geothermal, and sun. This means that Costa Rica has the ability to provide the clean, cheap, and stable energy that miners seek.
In January of 2022, the owner of a hydroelectric power plant in Poas, Costa Rica created a cottage industry for local crypto miners thanks to Costa Rica’s surplus in renewably-generated electricity. Crypto miners took over buying electricity from the hydroelectric power plant in 2021 after the Costa Rican government stopped buying power from it during the pandemic. Data Center CR now hosts and powers 650 digital mining computers, which operate 24/7. This is the first digital mining center in Costa Rica.
What Makes Costa Rica A Hotbed For Bitcoin?
Costa Rica’s economic and political stability is well-known around the world, especially compared to other Latin American countries. There are many tech companies based in Costa Rica that are trying to innovate the sector and make it even more interesting than it already is. Some are creating new coins, others are trying to make crypto as a whole more accessible.
Additionally, Costa Rica has a very good online infrastructure. In terms of fiber optic connections it can reach, it can tap into the ARCOS-1, Pan American Crossing, MAYA-1, and terrestrial fiber optic networks. This means that anyone can easily tap into the internet and get high speeds.
There are currently seven bitcoin ATMs in Costa Rica and this number is growing fast due to their usage increasing. They are used to purchase direct goods in stores or also to carry digital contracts. Customers can use their Costa Rican colones to buy from $10 to $300 in Bitcoin with up to 9% commission on transactions.
Costa Rica’s own currency has declined around 10% against the dollar in the past year and inflation has more people considering investing in cryptocurrency. Costa Rican employers can also legally pay their employees with cryptocurrency.
A Bitcoin Metaverse In The Jungles of Costa Rica
Circular economies are not the only use for the blockchain in Costa Rica. Some cryptocurrency enthusiasts are also looking to share Costa Rica with the world through NFTs and the Metaverse.
Alóki Sanctuary is a 750-acre property in Costa Rica purchased for over $30 million USD where the creators have made a space for users to immerse themselves in a digital jungle sanctuary replica of the real property. This massive property is being 3D-scanned into a Metaverse landscape with houses, coworking areas, and more. Their “Play-to-Own” model of the project allows players to eventually own and visit the plots of land they sponsor in Alóki – all as NFT-based assets.
By aiming to reconnect people to nature, Alóki offers its users the chance to actually participate in sustainable development through a blockchain-based game in which digital actions mirror those in the real world via NFT ownership. Planting a tree in the Alóki metaverse can result in a real tree being planted in the Alóki Sanctuary of Costa Rica – a perfect example of converting digital actions into real-world benefits.
“Our world needs blockchain as a basis for sustainable development in terms of energy, conservation and the reconnection with nature. We aim to allow our users to touch the beauty of Costa Rica in digital format and contribute to its flourishing,” states CEO and co-founder of Alóki, Bartek Lechowski.