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Free Republic Of Liberland
Summary Annual Report 2015 - 2016
MINISTRY OF FINANCE
THE FREE REPUBLIC OF LIBERLANDMINISTRY OF FINANCE
Summary Annual Report 2015 - 2016
January 2017
2
FREE REPUBLIC OF LIBERLAND
In Prague | February 2017
Image on cover: 3NTA
www.liberland.org
FOREWORD BY THE FINANCE MINISTER 3
FINANCIALS - SUMMARY 4
FINANCIALS - INCOME 5
FINANCIALS - EXPENSES 7
FINANCIALS - LIBERLAND MERITS 10
MINISTRY OF FINANCE ORGANISATION 12
OBJECTIVES AND TOPICS RELATED TO MINISTRY OF FINANCE 14
TABLE OF CONTENTS
Sandy beaches in Liberland
3
Dear Reader,
It has been 18 months since Liberland was born and 12 months since all fi ve ministry departments have been constituted.
I was appointed December 14th, 2016, after 5 months of daily engagement in the Liberland project. Since the beginning, we have been very consistent and clear about the ultimate objectives of what Liberland should be; and what it defi nitely should not be in the future.
We are building a libertarian, friendly and strong economic sovereign state, which will always be one step ahead of traditional countries. We deeply believe that state authorities should never pretend to have a better ability in doing things than the people, entrepreneurs, and companies from the private sector.
Due to Liberland’s vision and continuous progress, it has managed to attract many extremely interesting, smart and respected people from around the world and from various fi nancial industries. We have assembled a huge network of knowledgeable and professional people with backgrounds from the fi nancial services sector. These include the digital economy, global investments, the libertarian economy as well as futuristic digital states. Inspired by a book written by Hans Adam II, Liberland is demonstrating what a state in the third millennium will look like.
During the last one and a half years, Liberland has transformed its image that was presented by the media as ‘a Czech joke’ to ‘one of most interesting projects for the 21st century’. An online magazine ‘Seeker Daily’ has thoroughly analyzed the topic ‘How powerful is Liberland?’ It concluded with respect to its unique homogeneity, that Liberland is ‘the single most ideologically powerful nation on Earth since the Ancient Roman Empire’.
Liberland contributions and donations have exceeded 225k USD equivalent for the past period, where almost half has been provided in Bitcoins. This gives Liberland another top global position worth of following by other states.
The fi nancing has been supported by quite a unique concept of Liberland Merits. This motivates suppor-ters and investors to participate in building this European HongKong (what Liberland has sometimes been likened to).
The publishing of this annual report, by the Ministry of Finance, enables us to share the state of the treasury as well as the fl ow of funds for the past year.
As we progress with establishing a secure and rigid framework of legislation for international commerce to do business in Liberland, as well as expanding into International Banking, we can expect the free market to begin showing its power.
Long Live Liberland
Jan Purkrábek, January 2017
FOREWORD BY THE FINANCE MINISTER
JAN PURKRÁBEK
Finance Minister
4
FINANCIALS
SUMMARY The total Income for Liberland has reached the amount 225.126 USD equivalent in the period from April 13th, 2015 to December 31st, 2016.
201.244 USD equivalent (89.4 % of the total Income) has been used for covering direct expenses related to the key mission of the Liberland provisional government - to develop Liberland and set up the essential environment and infrastructure for the future growth.
The fi nancial cash fl ow result for the above period is a surplus of 23.883 USD equivalent (10.6 % of the total Income), which has been saved for the upcoming year.
There have been no public debts issued during the period, as stated in the Liberland Constitution.
The results have been consolidated for both Liberland State and Liberland Limited Ltd., a state-owned service provider and legal entity.
Total Income225,126.5 USD
Total Expenses201,243.6 USD
23,882.9 USD
2015-2016 cash overview (USD eq.)
5
FINANCIALS
INCOMEThe total Income of 225.126 USD equivalent was mainly represented by two streams.
First one is represented by at least 1.000 relatively smaller nominal incoming payments, often on a repetitive basis. Those counterparties call their contribution as ‘donation’ or even ‘voluntary tax’.
The second part is represented by relatively high nominal values considering strategic investments or high one-off donations from individual supporters or investors (see further).
Below is an overview of the total Income. The largest category with almost 40% is BTC mixing both small and large incoming payments. ‘Materna’ with 26.8% share represents payments received through the payment gateway which includes hundreds of received payments. Reformy (FIO Bank) current account is currently being phased out. This bank account had been used mainly to facilitate other payment services that were utilized during 2015.
Materna represents a large number (746) of small payment amounts received with an average value of 81 USD equivalent each.
Donations - payment gateway (Materna)
60,278 27%
Income from donations (Reformy)
42,927 19%
Strategic and Larger Investments
31,269 14%
BTC income87,040
39%
Other income3,613
1%
6
FINANCIALS | INCOME
The numbers of incoming donations through the main payment gateway were signifi cantly higher in three months of the year - February, August, and December (see chart below) and basically refl ects Liberland media coverage.
INCOME BY PURPOSE
In the current structure, all donators are rewarded (credited) with Liberland Merits with the nominal value 1:1 USD equivalent of his/her donation. This regime applies even if the creditor has declared a strict purpose of the payment. This attitude fl attens diff erences between payments as a voluntary tax and payment for the citizenship, as an example.
In the upcoming periods, we assume to diff erentiate among categories such as direct citizenship, voluntary tax from corporations, voluntary tax from individuals, pure donation/speculative Merit exchange, business incorporation fee, other state services income etc.
7
FINANCIALS | INCOME
INCOME PER CURRENCIES
The main currency for incoming payments (38.7%) has been Bitcoins ! This result is probably another world #1 example for Liberland, with an almost equal share of digital and normal (fi at) currencies in the state treasury. The Bitcoin eff ect is not only a demonstration of how progressive Liberland is, but also how most Liberland supporters prefer a non-centralised and non-infl ationary currency. A move away from traditionally monopolized currencies. It is also a very transparent tool since all the transactions are fully trackable and publicly available via the Bitcoin blockchain.
All other currencies are evenly distributed, which indicates a fairly regular distribution of Liberland supporters across the world.
Detailed sheet shows the split between currencies
We are proud that one of the top global Bitcoin investors Mr. Roger Ver belongs among the top Liberland contributors. It not only helps Liberland to grow and to fulfi ll the mission, but also throws a positive light on Liberland from a global investors’ perspective.
EUR30,731 13.7%
USD64,428 28.6%
BTC87,040 38.7%
other42,927 19.1%
8
The total expenses for the relevant period have reached the equivalent of 201.244 USD. The main use being traveling & diplomacy, together with conferences &events representing 37% of the total. More than 26% of the expenses was spent for assets purchases mainly related to the settlement in the territory, including other related settlement expenses on the place. The external services (mainly IT cost and lawyers) represent 20.4%. The rest is represented by administration expenses and other uncategorized expenses.
FINANCIALS
EXPENSES
Assets41,837
21%
Conferences & Events19,325
10%
Fees1870%
IT8,852
4%
Office & Administration25,024
12%Others9,057
5%
Services32,238
16%
Settlement10,828
5%
Travelling & Diplomacy53,896
27%
9
EXPENSES PER CURRENCY
Almost a half of the total expenses were paid in Bitcoins, approximately 23% expenses were in USD and 22% in CZK. EUR was least used for outgoing payments (8% share).
CZK43,30622%
EUR15,7188%
USD46,67723%
BTC95,54247%
FINANCIALS | EXPENSES
10
The Liberland Merit is a unique evaluation token system, rewarding any contribution coming into Liberland. After registration, anyone can contribute either by donation, by labor or any other acceptable way. The total amount of Liberland Merits issued has reached 852.059 LLM as of 31st of December 2016.
All donations or third-party related expenses have been rewarded by 1:1 to USD equivalent. The contribution through labor or activity has been used more frequently, in the average ratio 4:1, as per the chart below.
The Liberland Merits concept has been justifi ed by real-world experience. Liberland Merits as a future digital currency is already getting its value, even without any free-market convertibility. The transformation to a real digital currency is planned to start during 2017, including a public off ering (IPO/ICO).
FINANCIALS
LIBERLAND MERITS
Financial contribution equivalent
LLM 168,659 19.8%
Labor & effort evaluation
LLM 683,400 80.2%
11
There was a public poll held in April 2016, voting with almost 50% for “LLM” as the offi cial currency abbre-viation for Liberland Merits, as per global standards.
Another poll is planned to be held for fi nding best currency Unicode symbol.
FINANCIALS | LIBERLAND MERITS
12
Liberland Ministry of Finance has been incorporated by the Liberland Constitution.
The strategy for Liberland fi nance has always been standing on following four key robust pillars:
Voluntary taxation
No government debts
Minimal government expenditures, no fi scal policy
Free competition of currencies, no monopoly legal tender
Liberland Ministry of Finance structure
The responsibilities of Ministry of Finance have been divided into three main sections, followed by three departments.
Department of Strategic Planning defi nes Liberland fi nance principles and follows the key libertarian principles of free economy, free trade, and minimal government interferences. Setting up this framework also means an attractive environment for business and for Liberland investors.
From a long-term perspective, apart from development activities, some sustainable perpetuity income streams must be stabilized for covering minimal state expenses. It will consist of income from citizenship, from the growing economy (voluntary taxes), from the land rent and other income streams.
Department of Monetary and Macroeconomic Issues is responsible for all general monetary topics. The defi ning task is to utilize Blockchain technology to establish the fi rst state-sponsored crypto-currency, the Liberland Merit. As the leader in this regard, Liberland will support the use (but not require) of a non-in-fl ationary crypto-currency with no physical banknotes or coins and no government ambition to infl uence markets through proactive monetary policy making.
Mr. Hollis Hedrich
Head of the Department of Monetary and Macroeconomic issues
MINISTRY OF FINANCE
STRATEGIC GOALS AND ORGANIZATION
13
Department of fi nancial operations will take the responsibility for cash management, accounting, con-trolling, budgeting, reporting, and auditing. Most of the operating agenda can be done automatically and transparently online with minimal human input required.
LIBERLAND ECONOMIC ADVISORY COUNCIL
Apart from the three ministry departments, the Liberland Economic Advisory Council has been created. This committee represents an independent advisory body of ultimately 5-15 international professionals, whose expertise, opinions or abilities are valuable for the Liberland development. Its purpose is to aggregate and oppose ideas and potential steps of Liberland considering both classical Libertarian and modern fi ntech and rapidly evolving fi nancial landscape.
The committee currently has 4 members as at December 31st, 2016; other respected professionals will be recruited in 2017.
Mr. Alexander Borodich Mr. Vladimir Pikora Mr. Dominik Stroukal Mr. Martin Panek
LIBERLAND KEY EXTERNAL VENDORS
In the fi nancial resort, we rely on several external providers, to outsource highly professional services or products. Among the most important are:
Online payment gateway Bitcoin banking Fiat / crypto debit cards
MINISTRY OF FINANCE STRATEGIC GOALS AND ORGANIZATION
14
OVERVIEW OF ALL TOPICS RELATED TO
MINISTRY OF FINANCE
Situation
Liberland is a sovereign state, but still suff ering from a limited capability to act on its own behalf. Opening a bank account (with IBAN) at an existing bank is not desirable due
to strategic security reasons, but using solely BTC accounts is not suffi cient for third offi cial parties and authorities.
Outlook
After incorporation of companies, Liberland Ministries and Embassies can obtain a unique ID and a legal status (1-2Q 2017). The Bank of Liberland will be opening current
accounts for international currency payments allowing global commercial banks to operate from and/or in Liberland.
Legal status for fi nancialoperations
Situation
Liberland is using a multi-currency (EUR,USD, and BTC) bank account held with BitSuisse. For the incoming payments through the payment gateway, Liberland has been successfully using Materna services. An offi cial Bitcoin address (wallet) is also
under operation.
Outlook
BTC Debit cards for transparent expenditures with automatic currency conversion (2017). Flow all incoming payments through BTC account (1Q 2017)
Cash management
Situation
Liberland donation BTC account and FIO bank account are transparent and available in real time online.
Outlook
Process all transactions through blockchain public ledger, to show the cash fl ow tran-sparently online in real time (2017). An automatic real-time IAS accounting on blockc-
hain and IFRS reporting on a quarterly basis to the media with as a press release (2017). Certifi ed auditor report provided on an annual basis.
Transparency accounting
and auditing
Situation
Liberland annual budgeting represents a very simplifi ed procedure at this moment.
Outlook
All ministries will raise their required fi nancial standards for projecting and reporting based on their objectives and capabilities. Forecasts for annual and multi-year periods
will be standard.
Budgeting
Situation
Business incorporation in Liberland is one of the key services for the economic develo-pment. The legal system is choosing the best from most progressive global destinations.
Outlook
The fi rst international companies will be incorporated in Liberland during 1Q 2017. This also represents a potentially signifi cant income for Liberland going forward.
Business incorporation
Situation
There is no possibility to open a bank account in Liberland at present
Outlook
Having business register and incorporate in 2017 is the fi rst necessary step. Banking licenses will be issued so end users (individuals and corporates) will be able to open in-ternational bank accounts in Liberland. We'll be grateful to invite all players in interna-
tional banking as well as progressive fi at-crypto banking services to Liberland.
Commercial banking in Liberland
15
OVERVIEW OF ALL TOPICS RELATED TO MINISTRY OF FINANCE
Situation
Most of the normal privileges of Central Banks is prohibited by Liberland Constitution
Outlook
Some of the minimal necessary roles will be provided directly by the Ministry of Finance and partly delegated to a separate entity (2017)
Bank of Liberland (Treasury authority)
Situation
Liberland Merits is a token system (see above) which has proved to be a motivating model for energy coming into Liberland. Among the main purpose of collecting
LLM is obtaining citizenship, buying shares in Liberland Land Fund and participate fi nancially on the future development of the territory, purchase other State services
if any required etc.
Outlook
Liberland Merits Act to be put in place in 2017 transforming LLM to a publicly tradable cryptocurrency allowing for a freely fl oating exchange rate. Institute an Initial off ering
(ICO).
Liberland Merits (LLM)
Situation
No offi cial statistics are held by Liberland government. GNP produced by current Liberland citizens is estimated at millions USD. After including Liberland applicants
the overall national annual production rises to billions of USD.
Outlook
GNP will be signifi cantly infl uenced by increasing citizenship applications approved, as well as by commercial entities incorporated in 2017.
GDP will become relevant once the territory (at least ships) get permanent residents. Also, a signifi cant impact on the whole region is expected (some additional 0.5% of Croa-
tian and Serbian GDP is projected as a result of Liberland)
GDP/GNP and macroeconomic
relations
Situation
3 reasons for using Bitcoin in Liberland: (i) extremely practical instrument for mana-ging international money transfers (ii) it is a public ledger (iii) free and independent
currency.
Outlook
We encourage all participants to prefer non-infl ationary Bitcoins vs. traditional fi at money. On the other hand, neither Bitcoin nor any other currency will attain the status
of monopolistic legal tender in Liberland.
Bitcoins
Situation
Liberland is the only entity having the territory of 7km2 registered in the cadastral maps and also the only entity claiming this territory according to international law.
Outlook
Strengthen the legal status of territory through land law. Through 100+ years lease contracts allow to build up Liberland infrastructure to free
market. As a result, a sustainable income to Liberland budget to cover related expenses will be provided. The surplus/profi ts will be paid off to shareholders of the land fund
and/or buff ered into a sovereign fund
Liberland Land Fund
Situation
Liberland has built up a very strong and complex network of representative offi ces in 80 countries on 5 continents. The primary mission of the representative offi ces is to
develop Liberland ideas and support local steps for recognition
Outlook
Once Liberland business entities will arise, the representative offi ces could benefi t from the network, contacts and knowledge of their local markets. Play the role of "Chambers
of Commerce" by attracting business from/to local country and Liberland.
Embassies and chambers of commerce
www.liberland.org
