The island rotates towards Honduras. Image by Andres Alvarado via Lizenz: Creative Commons

A special economic zone in Honduras is making Bitcoin the unit of account for the tax authorities. This means that Bitcoin fulfills the primary function of money for the first time.

Próspera ZEDE, a special economic zone in Honduras, officially makes Bitcoin a unit of account. Some crypto media are celebrating this as a breakthrough and game changer that, like Cryptopolitan, “heralds a new era in which digital currencies are not just dazzling digital assets, but central players in the economic context.”

So so. That doesn’t sound entirely new at first glance. The German BaFIN declared Bitcoin a “unit of account” more than 10 years ago, but this was not a game changer, but rather the start of a regulatory initiative that has permanently paralyzed the industry in this country. Is the news from Próspera just the same stale wine in a new bottle – or is something fundamentally different happening?

The answer is the second. A company called Zion Labs registered in Próspera has asked the tax administration for binding information on whether it can use Bitcoin as a unit of account. Little is known about the company itself; a Google search only leads to dietary supplements. The tax administration has now responded positively to the request: all physically or electronically established companies may “use Bitcoin as their unit of account, namely as a monetary unit or measure of value in which their accounts are maintained and their values ​​are reported”.

This is actually a bang. At that time, BaFIN only treated Bitcoin as a unit of account from a regulatory perspective, while it is neither permitted for tax nor accounting purposes to use Bitcoin as such. In Próspera, however, this is exactly what is possible – for the first time ever. A unit of account is probably the noblest and most important function of money. Real estate can also serve as a store of value, and credit cards can also serve as a means of payment. But the unit of calculation, i.e. the measure of all things and the vocabulary that allows us to talk about prices at all – that was and has always been reserved for money.

You could say that with the Prospera tax administration’s decision, Bitcoin became truly money for the first time. The decision applies not only to the applicant, but to all taxpayers, and, the authority emphasizes, it was made “without prejudice against the type of cryptocurrencies,” which probably means that it is willing to accept other cryptocurrencies as a unit of account upon request acknowledge.

But the special economic zone is still stuck halfway. Although companies are allowed to calculate their tax liability in Bitcoin, they must submit it to the tax administration in dollars. But this is explicitly a temporary solution. In the future, Bitcoin will also be approved as a complete unit of account.

As strong as this message sounds, it should not be overestimated. With 10 million inhabitants, Honduras is a rather small country in Central America and one of the poorest in the subcontinent. The Próspera Special Economic Zone consists of several towns on the island of Roatán and has an autonomous government and tax administration. In 2020, the island had around 110,000 inhabitants; according to the website, more than 100 companies with thousands of employees have currently set up shop in the special economic zone.

So it’s a pretty small region. But every movement has to start at a point. What’s important is that it doesn’t stop there.


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