On a humid December evening in Puerto Rico, more than 100 cryptocurrency and blockchain aficionados gathered at a mansion within a gated, jungle-like enclave of San Juan. A local band played softly while waiters served hors d’oeuvres to attendees who paid as much as $3,000 to attend CoinAgenda Caribbean, a three-day conference promising a VIP experience of networking opportunities and fireside chats about the future of the industry. The crypto crowd arrived in chartered buses to the party, where they sipped on cocktails from an open bar around a pristine white pool, frogs singing in the trees surrounding the property owned by Michael Terpin, founder of CoinAgenda. A private chef from Lyon, France, provided a five-course meal – a fusion of French dishes and Puerto Rican staples like a pig roast and rice and beans. Conversation meandered through typical talking points – new token launches, an app for ordering private jets, and musings on what it’s like to relocate to Puerto Rico, home to one of the world’s most active crypto communities thanks to tax-friendly incentives. But one topic seemed far from everyone’s mind: FTX, the crypto exchange that spectacularly collapsed in November, and its now jailed founder Sam Bankman-Fried, who in the last few weeks alone lost his company, was arrested in the Bahamas on charges of fraud and money laundering, and sparked perhaps the greatest reckoning yet over the industry’s survival. From the beaches of Puerto Rico, the “crypto winter” is looking balmy. While lawmakers and industry analysts say the FTX debacle has exposed serious flaws at the heart of crypto’s promise, many here aren’t giving up. In fact, they’re doubling down. “People who have been around awhile realize that there are cycles,” said Terpin. “We have more volatility than the stock market because we are a younger space – but if you’re an experienced investor, you’re not worried.” The CoinAgenda Caribbean conference took place as part of the second annual Puerto Rico Blockchain Week, a five-day series of events exploring blockchain technology, crypto, and its impact on the island. Throughout the week, FTX seemed to be an afterthought – mentioned only sparingly in the hours of panels and discussions. One crypto entrepreneur sheepishly admitted he had lost $70,000 in the FTX collapse, but said he planned to continue with business as usual. Another said she worked in real estate on the island and had several clients seeking to sell their homes to finance more crypto purchases while prices are low. Others argued that the FTX scandal would ultimately be positive for the industry, weeding out fraud and creating more legitimacy. Terpin acknowledged that attendance at CoinAgenda was slightly down this year, as is common when bitcoin’s price falls – but said that at times like these, there was “higher quality attendance”. Terpin says he came to the island in 2016 on the precipice of a continuing influx of crypto entrepreneurs fueled by generous tax breaks on capital gains. In the years since, the community has grown exponentially, with hundreds of newcomers taking advantage of the laws. As the dinner party drew to a close, he raised a toast to the growing blockchain community, citing the success of Pantera, a crypto firm founded by the former Goldman Sachs bond trader Dan Morehead that has operations on the island and raised $1.6bn this year. “They say we aren’t bringing money to Puerto Rico – how about $1.6bn?” Terpin said, alluding to a longstanding criticism: that wealthy outsiders are having a negative effect on Puerto Ricans by driving up living costs, and that local entrepreneurs have not benefited equally from the crypto boom. “The best thing that could happen is that the crash makes them leave,” said Marina Reyes Franco, an art curator whose recent projects center on the cultural impact of the “visitor economy” on the island. She said that, although she had grown up in San Juan, she had struggled to find affordable housing in recent years. “At the end of the day, this is about a new era of colonialism and laws that only benefit the elite.” ‘Newcomers have an unfair advantage’ The race to turn Puerto Rico into the “Silicon Valley of the Caribbean” has been under way for years, as the US territory struggled with debt crises and sought to make itself attractive to outside capital. The effort escalated in 2012 with passage of the Individual Investors Act (Act 22), a measure offering high-net-worth individuals and investors who relocated to Puerto Rico a chance to evade capital gains taxes, which can reach 20% in the mainland US. The tax decree, coupled with a bull run in crypto prices between 2017 and 2021 and a real-estate market reeling from Hurricane Maria in 2017, made it an ideal locale for entrepreneurs and investors. Proponents of the tax breaks argue that attracting investment to the island will inject funds into the ailing economy and stimulate development. But many who live here question that. They say the influx of wealth has fueled rising rents and evictions in San Juan, where housing prices increased by 22% between 2018 and 2021 as beneficiaries of the tax breaks bought up properties. Research by the US Department of Economic Development and Commerce (DDEC) found beneficiaries of the law spent an estimated $1.3bn on local real estate between 2015 and 2019. Critics say the economic benefits of Act 22 aren’t clear cut. Analysis published by the Center for Investigative Journalism in June 2021 found recipients of the incentive had “barely achieved any job creation or economic impact”. The DDEC report found that tax beneficiaries had created only 4,400 new jobs between 2015 and 2019, less than three jobs per beneficiary. The escalating housing crisis, coupled with high-profile controversies involving some of the biggest names in crypto, has stoked anger throughout the US territory. A short documentary on the topic released this year by Bad Bunny, the Puerto Rican reggaeton superstar, brought the issue further into the mainstream. Following the collapse of FTX and with bitcoin’s price hitting two-year lows, many locals are hopeful the bear market will push some of the increasingly unwelcome newcomers out. “The end goal of these policies is rooted on the idea that nothing is happening in Puerto Rico – that it’s just a sandbox to experiment and build in,” said Jorge Vega Matos, a climate tech executive native to the island who splits his time between Puerto Rico and Germany. “This follows a legacy of colonialism in Puerto Rico, where an already exploited local populace is meant to embrace anything imported as automatically superior.” There are other tax breaks that do benefit local residents, a point the National Puerto Rican Chamber of Commerce is seeking to clarify. As part of the Blockchain Week, the chamber organized a workshop conducted in Spanish that was attended by more than 100 Puerto Ricans. However, many Puerto Rican founders trying to break in say they are inherently at a disadvantage without the benefits their neighbors enjoy from Act 22 – which applies to people who have relocated to the island recently. “Would a lot more native Puerto Rican ventures and entrepreneurs find more success if they had the same incentive opportunities? No doubt,” said Vega Matos. “They have the vision, talent, and drive. But the reality is newcomers have an unfair advantage.” ‘It is a one-sided relationship’ With the industry in crisis and many taking stock, entrepreneurs see a chance to build a more equitable crypto future. Throughout Blockchain Week, many sessions brought up how to bridge the gap between new investors and local entrepreneurs. Monday kicked off with a conference called BUIDL Here, organized by the Puerto Rico Blockchain Trade Association, a group founded with the goal of making the blockchain community on the island more inclusive. Its executive director, Keiko Yoshino, who moved to Puerto Rico in 2021, said she saw the need to launch the organization when she went to her first “Crypto Monday” happy hour, a weekly meetup for the community. “There were no women, and there were no Puerto Ricans, and I thought ‘OK, this is a problem,” she said. The crowd at the BUIDL event – about 50% female and 50% Spanish-speaking – differed dramatically from the usual crypto demographics. Tickets to the event were $250 and free for some local students and community members; other events during Blockchain Week could cost thousands of dollars. Yoshino said BUIDL had seen attendance double since 2021 despite the difficult market over the past year. The local Puerto Rican crypto community has grown exponentially as the Puerto Rico Blockchain Trade Association launched CryptoCurious – a group dedicated to outreach on the island. It has hosted meet-ups and trainings for hundreds of people and has seen a huge increase in interest in recent months, said its director, Shirley McPhaul-Castro. She said the market lows had created new opportunities for local entrepreneurs and artists to explore blockchain. “The best thing to do in a bear market is to build, and that is what we are doing.” But some said they had struggled to get a piece of the growing funds on the island. Michaelangelo Angleró, who was born in San Juan and in 2018 founded an AI-powered asset manager for crypto, said he often felt he was up against a “buddy system” in which local investors only fund one another’s projects. “It is a one-sided relationship where they are making billions and investing very little locally,” he added. “Most of these people don’t really give a shit about Puerto Rico, the community, or growing the local ecosystem.” Angleró described trying to raise $3m in funding for his company last year, and said he could only secure about $160,000 from local investors and had to travel to Europe to close the gap. He said at one point a local investor had promised him $1m, only to disappear; others laughed when he suggested allocating more to Puerto Rican founders. “It’s been impossible to raise funds,” he said. “They tell me ‘Puerto Rican companies are not investable’. And it’s degrading, because it’s my home – it’s my industry, too. I want to be here.” Individuals taking advantage of the tax laws argue they have contributed to the local economy in a number of ways, from sales tax on purchases to hiring locally at their firms. Terpin rejected the “false narrative” about newcomers to the island, saying he had funded a number of Puerto Rican startups and mentored local founders. He argued local residents needed “a lot of education” about how to pitch their companies. “You don’t land on the island and are all of a sudden mandated to fund any project,” he said. “In Silicon Valley, you can’t go in and say because you grew up in Modesto you deserve funding – you have to show how you are going to make money. Investment is not charity.” Critics of Act 22 say its impact is contributing to an exodus of Puerto Ricans from the island, with nearly 12% of residents migrating away between 2010 and 2020. US lawmakers including Chuck Schumer and Alexandria Ocasio-Cortez have spoken out against the measure, while María de Lourdes Santiago Negrón, a senator and vice-president of the Puerto Rican Independence party (PIP), filed legislation last year to repeal Act 22, saying it created “a tax apartheid” that allowed millionaires to settle on the island “without having to make any contribution to the country”. “It is not logical in a country where millions of people are leaving every year to continue laws that make it impossible to live in Puerto Rico,” her chief of staff said in an interview. “Laws that exist instead to make it easier for outsiders to enjoy the privilege of living here without contributing locally.” Meanwhile, local entrepreneurs are still fighting for a seat at the table. Anglero said he supported tax incentives broadly, but he suggested the laws should be changed to require newcomers to the island to invest a set amount in local businesses based on the tax savings they are enjoying. “When you are moving here, you are coming to the oldest colony in the world that has historically gotten the short end of things,” he said. “There may not be a legal obligation, but there is a cultural and moral obligation for you to be a good citizen and nourish the ecosystem you are a part of – you need to invest in the community.”