A Complete Guide To Every Cryptocurrency SEZ In The World

By Thibault Serlet, Co-Founder and Chief Researcher of The Adrianople Group, creators of the Open Zone Map

 

Overview

Over the last five years, many Special Economic Zones have been built to focus on crypto currency and blockchain. They offer lucrative industry-specific incentives in hopes to attract innovative companies.

Special Economic Zones (SEZs) are business parks which have been granted exemptions from a wide variety of government regulations to stimulate economic growth. There are over 7,500 SEZs located in 70 countries worldwide. Typically, SEZs have targeted industries such as manufacturing, logistics, and shipping.
These new crypto SEZs have the promise to allow for entrepreneurial innovation in an otherwise still hyper-regulated environment. This article is a guide of every major crypto-SEZ that currently exists.

Currently, there are only three active zones specifically targeting crypto and fintech: the Cayman Enterprise City, Dubai Multi Commodities Centre, and Belarus High Technologies Park. However, dozens of zones are currently planned to target these industries.

Active Crypto SEZs

Cayman Enterprise City

The Cayman Enterprise City is an office park located in the Cayman Islands which opened in 2011, and started offering a regulatory sandbox for crypto projects in 2017. It is home to a wide variety of different enterprises, with fintech just being one of many industries that the zone targets. Cayman Enterprise City has a reputation for having an exceptionally friendly, talented, and efficient staff.

The zone is currently home to 250 tenants. Crypto companies such as Brave and Binance are incorporated here..

Tech City Cayman is a subdivision of the Cayman Enterprise City which focuses on fintech, crypto, and blockchain. Companies located there benefit from a wide variety of incentives. A wide variety of taxes are completely abolished such as corporate income tax, personal income tax, capital gains tax, VAT, and sales tax. There are also no government reporting or filing requirements for many activities which, in the US, would be governed by the SEC. Finally, all companies located in the zone can issue an unlimited number of business visas to employees or contractors.

Cayman Enterprise City’s infrastructure is very standard for office park SEZs, with nothing special. It is home to the University of the Cayman Islands. The zone has access to an international airport with direct flights to most US East Coast cities. The most notable aspect of the infrastructure is the zone’s location near a beachfront touristic area. The cost of electricity is $0.22 per kWh, is above the world average of $0.14 per kWh, making it unsuitable for mining.

The main risk with locating in the Cayman Enterprise City comes from the Cayman Islands’ reputation as a tax haven. Despite this reputation, the country was removed from the EU’s list of official tax havens in late 2020. Corruption, crime, and property rights issues do not pose any significant risks. The Cayman Islands should be considered to be a low risk jurisdiction.
Incorporating there takes on average 4 to 6 weeks, and costs roughly $20,000. Because the cost of living is high in the Cayman Islands, it is one of the more expensive zones on this list.

Dubai Multi Commodities Centre

The Dubai Multi Commodities Centre is located in downtown Dubai, in the UAE. The zone opened in 2002 to cater to the commodities trading industry. In May 2021, the zone announced that it would extend the incentives that it offers to attract crypto and blockchain companies. While the zone’s crypto and blockchain incentives are very recent, the zone has a longstanding reputation as one of the largest SEZs in the world.

The Dubai Multi Commodities Centre is one of the largest business park style SEZs in the world, being home to more than 18,000 tenants. Prominent tenants include companies from a variety of industries such as Google, Blackstone, Glencore, Cargill, and Mitsubishi.

Tenants enjoy exemptions from the corporate income tax, import taxes, and export taxes. The VAT has been reduced to 5%. Companies in the zone enjoy 100% foreign ownership. Regulations regarding the repatriation of capital abroad have also been streamlined. Companies in the zone enjoy preferential treatment when applying for business visas.

In May 2021, the zone launched a dedicated Crypto Center. Companies taking part in the program enjoy simplified rules when issuing security and utility tokens. The zone will also start using distributed ledgers for its internal operations. Companies also enjoy preferential treatment when dealing with the UAE’s Securities and Exchange Commission.

The zone itself consists of 28 office towers, a shopping center, and outdoor park. The zone is located less than an hour from the Dubai International airport. The price per kWh is $0.08, which is below the global average of $0.14 per kWh but still too high to justify mining.

Risks of relocating to the UAE are generally low. Dubai is home to a wide variety of companies, and has a good track record when it comes to corruption for foreign companies. While Dubai has, in the past, had serious human rights issues the city has recently been working to improve its international reputation. Dubai should be considered to be a generally low risk jurisdiction.

The minimum amount of capital required to incorporate in the zone is $14,000 and the process takes 7 to 8 weeks. Note that a number of other zones in Dubai are also planning on launching similar programs to attract crypto and blockchain companies such as the Dubai Airport Free Zone, Silicon Oasis, and Dubai International Financial Center.

Belarus High Technologies Park

The Belarus High Technologies Park is an office park located in Minsk, the capital of Belarus. The park opened in 2005 to cater to the tech industry in general. In 2018, the government’s Decree on Development of Digital Economy was created to facilitate business in the park, and includes many provisions targeting the crypto industry.

Belarus High Technologies Park is currently home to 758 companies.

The park has some of the world’s strongest legal incentives for the crypto industry. Tenants are completely exempted from most taxes including the VAT tax and corporate income tax until January 1 2049. The Decree on Development of Digital Economy also explicitly recognizes the validity of smart contracts, making Belarus the first country to do so. Rules concerning cross currency transactions have also been simplified. Tenants are treated favorably when applying for business visas for employees or contractors.

The Belarus High Technologies Park is a mixed use industrial park located in 50 hectares of land. In addition to office buildings, it also includes a hotel, restaurants, a clinic, and a sports area complete with a swimming pool. The cost of electricity is $0.08 per kWh, which is below the world average of $0.14 per kWh, but not low enough to justify most mining operations.

Relocating to Belarus comes with many significant risks. Belarus is a dictatorship, and its citizens face significant problems with corruption and human rights abuses. In 2020, mass protests against the government were met with violent police repression. The country is politically aligned with Russia, making it potentially more risky for US companies. Finally, Belarus has a reputation for being home to scammers, creating a potential reputation risk for companies located in the zone. Companies thinking of relocating to Belarus should be cautious; the country should be considered as having medium to high risk.

Data about incorporation costs and time is unavailable.

Planned Crypto SEZs

Cagayan SEZ

Cagayan, a region in the north of the Philippines, is home to an SEZ which plans to target crypto and blockchain. Of all of the planned crypto SEZs, it is by far the most far along.

The zone will be centered around an international airport with an attached business park. The zone plans to offer “Offshore Virtual Currency Exchange” licenses. The licensences will enable companies to engage in offshore fintech and crypto exchange activities. Although the zone is still incomplete, 40 companies have already received licenses.

In early 2020, officials managing the zone were charged with corruption. They were alleged to have accepted bribes in order to issue licenses to potential tenants. Although the zone has pledged to be more transparent in the future, serious concerns surrounding corruption remain. These charges have also caused serious delays, prompting many investors to back out of the project.

Shenzhen

Shenzhen is China’s oldest SEZ. It was founded in 1980 by Deng Xiaoping, and is credited with having been a major factor in China’s economic success over the last 40 years. The zone grew from a small fishing village of 65,000 to a booming megacity of 14 million. Business in Shenzhen enjoy a wide variety of regulatory benefits as compared to businesses operating elsewhere in mainland China.
In August of 2019, the Chinese government announced that companies located in Shenzhen would enjoy a wide variety of incentives to stimulate blockchain fintech research. The specific incentives that companies would enjoy were never listed.

More recently, there have been rumors that China will either completely ban all foreign cryptocurrencies or ban all mining. Due to the still uncertain fate of Chinese crypto, the state of Shenzhen’s pilot blockchain fintech program is unclear.

Armenia

In 2018, the Armenian government approved the creation of a crypto mining SEZ. The specific regulations to be enjoyed by tenants are unclear. The three years since the announcement of the creation of the zone have been difficult for Armenia. Within weeks of the announcement of the zone, the sitting government was overthrown during a peaceful revolution. In 2020, at the height of the pandemic, Armenia went to war with Azerbaijan. Finally, in 2021, a counter-revolution unseated the current government.

Due to Armenia’s recent political instability, the current fate of the project remains unclear.

Russia

Russia has an uncertain history with cryptocurrency. Until July 2020, it was unclear whether owning cryptocurrencies was illegal or not. Finally, the government clarified that cryptocurrency ownership was not illegal for common citizens, but illegal for government officials.

Because Russia has some of the cheapest electricity prices in the world, there have been many proposals to create SEZs for mining. For several years, there have been rumors that Russia will open a crypto mining SEZ near the Chinese border. More recently, prominent Russian mining company BitRiver announced that it would tokenize the creation of a mining SEZ in Siberia.

Iran

Iran’s cheap electricity has attracted significant interest on behalf of investors interested in establishing crypto-mining operations. Several existing SEZs have already begun allowing crypto-mining. There have also been rumors that Iran will soon announce a dedicated crypto SEZ. Iran’s ambiguous political status, as well as the questionable legal status of cryptocurrency in the country, makes the future of these projects unclear.

Other Projects

Many other projects have been proposed, although none have yet to materialize. These include a planned crypto city in Nevada, a project in Senegal pioneered by pop star Akon, rumors about the creation of mining SEZs in Myanmar’s Mongla Special Administrative Region, and the announced the creation of mining operations on Margarita Island in Venezuela. Several small startups also plan on creating crypto centric SEZs, although none have made any significant progress. These include Ledger Atlas, Bluebook Cities, and the House of DAO.