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THE FREE REPUBLIC OF LIBERLANDMINISTRY OF FINANCE
Summary Annual Report 2018
April 2019
2
FOREWORD BY THE FINANCE MINISTER 3
FINANCIALS - SUMMARY 4
FINANCIALS - INCOME 5
FINANCIALS - EXPENSES 8
FINANCIALS - LIBERLAND MERITS 10
MINISTRY OF FINANCE - ORGANIZATION AND STRATEGY 13
TABLE OF CONTENTS
Sandy beaches in Liberland
3
Dear Reader,
it is a pleasure to issue the annual fi nancial statement on the occasion of Liberland’s 4th anniversary celebration.
The state of Liberland worked with a budget of almost half a million dollars in accounting year 2018. The total expenses, spent on building Liberland, were fully fi nanced by operational income and reserve funds.
The cryptocurrency markets reported high volatility and a strong correction trend (compared to fi at mar-kets), which impacted on Liberland reserves negatively. Nevertheless, the percentage of cryptocurrency in the Liberland state budget still exceeded 50% of all transactions in 2018.
Liberland has put signifi cant eff ort into the regional settlement program called “Liberland on the Water”as well as its tokenisation, as the territory dispute with Croatian administration is still waiting on court deci-sions and further litigation. This program was, together with IT and diplomacy most fi nancially demanding area in 2018.
Ongoing diplomacy eff orts have brought number ofspecifi c progress moments,such as Liberland discussed in the European Parliament, a permanent presence in Somaliland, our US mission, promoting Liberland at many important cryptocurrency and blockchain conferences. All these eff orts and more have resulted in valuable partnerships and opportunities.
Another important topic of the year was a global tender aiming for public trading and listing of the Liberland Merit. Our ICO has been yet postponed as a result of required fi nalisation of all parameters of the Merit tokenomics, as well as achieving the best timing due to the low investment sentiment on the market in the second half of 2018.
In the past year, Liberland IT has reached huge progress towards implementing decentralised Governance (meritocracy and direct democracy) via voting with Merits, our e-residency program, web and internal database systems, all with preparations for automatic governance with minimal human-government in-teraction in the future.
The Liberland business spirit has incorporated the Liberland Chamber of Commerce, with a dozen of ini-tial members, seeing the future inthe competitive Liberland tax environment as well as in tokenization of projects and ideas, coming from the crowd and into the token exchanges.
Year fi ve of Liberland existence will be all about bringing permanent settlement on the water, decentralised decision making by all Merit holders, as well as introducing Merits to the global exchanges.
Long Live Liberland!
Jan Purkrábek, April 2019
FOREWORD BY THE FINANCE MINISTER
JAN PURKRÁBEK
Finance Minister
Jan Purkrábek, Aprilillilililililillllilillilililillililillilllllil 2019
4
FINANCIALS
SUMMARY The total Liberland income has reached the amount of $458,077 USD in calendar year 2018 (note: “USD” means “USD equivalent” recalculated to USD with the exchange rate valid at the day of each transaction). This total income is represented by both strategic investments as well as small amounts from donations.
With total expenses of $503,605 USD, total cash expenses exceeded income by $45,427 USD in 2018. This diff erence was covered by cash surpluses accumulated in the previous years, mainly generated by crypto-currency appreciation in 2017.
As in the previous year, the closing balance held by end of the year 2018 consisted of only 9% in fi at, while 91% was held in crypto. The three main cryptocurrencies used were Bitcoin (BTC), Bitcoin Cash (BCH) and Ethereum (ETH).
In general, the year 2018 faced a bullish trend for cryptocurrencies, as the total crypto market capitalisa-tion dropped down low after rocketing to new heights at the end of 2017.
The closing cash balance was $42,684 (USD equivalent) as of 31st December 2018. It was mainly infl uenced by the operational expenses, as well as by price drop of cryptocurrencies, that occurred shortly thereafter in 1Q 2018.
Neither public debts nor any other form of bonds have been issued in 2018. Liberland Government has no granted power to enforce collecting money from the Citizens, nor issue public debts on citizens’ behalf.
All presented results have been formally consolidated for both Liberland State and Liberland Limited Ltd., a state service provider.
5
FINANCIALS
INCOMEThe total Operating Income of $458,077 USD was mainly represented by two major streams.
This amount of $261,046 USD eq. (57%) is representing payments identifi ed as Strategic Investments, while remaining part of 43% ($197,031 USD eq) is represented by more than 400 donations, relatively smaller nominal incoming payments, partly on a repetitive basis. These contributors classify their contribution as ‘donation’ or as their ‘voluntary tax’. Most of them were received over the online payment gateway (Materna), small BTC transfers or via Paypal.
Strategic and Larger Investments incl.
citizenship261,046
57%
Voluntary tax & donations197,031
43%
Total Income 2018 458,077 USD
Category Amount Currency equivalent ShareNumber of
transactionsAverage
transactionStrategic and Larger Investments incl. citizenship 261,046 USD 57.0% 31 $8,421
Voluntary tax & donations 197,031 USD 43.0% 413 $477
Total Income 2018 458,077 USD 100% 444
6
FINANCIALS | INCOME YEAR OVER YEAR
Operating income reported stable growth by more than 30% every consecutive year.
INCOME BY PURPOSE ASSIGNMENT
All donators are rewarded (credited) with Liberland Merits at the nominal value 1:1 USD equivalent of his/her donation, calculated based on the exchange rate valid at the transaction date. This regime applies even if the creditor has declared a strict purpose or payment assignment.
In any case, most of the payments are initiated by the sender as “unassigned donations”as of today, sin-ce the prevailing intentions are driven by buying their voting power in the future Liberland decentralised governance administration(DAG), which is being prepared for launch in 2019.
2015-2016 2017 2018Operating income 225,126$ 334,105$ 458,077$
$225,126
$334,105
$458,077
$-
$100,000
$200,000
$300,000
$400,000
$500,000
2015-2016 2017 2018
Operating income year over year
7
FINANCIALS | INCOME PER CURRENCIES
The most used currency for incoming payments in Liberland state budget in 2018 was Bitcoin. The % share of BTC was oscillating around 1/3 of the total income (33.9% in 2018) . Liberland keeps on holding, without any doubts, the global #1 position with almost 60% share of state income in digital cryptocurrencies (growth from 49% in 2016). In addition, as high as 90% (!) of the state balance is held in cryptocurrencies by the end of 2017. The increasing % share of BTC, almost in equal signifi cance with BCH, together demonstrate where Liberland supporters and investors see the future of currencies and global payment systems.
EUR63,015 13.8%
USD29,849 6.5%
BTC155,210 33.9%
BCH120,000 26.2%
CZK89,777 19.6%
BSV96
0.0%
GBP129
0.0%
Currency AmountCurrency
equivalent% share
EUR 63,015 USD 13.8%USD 29,849 USD 6.5%BTC 155,210 USD 33.9%BCH 120,000 USD 26.2%CZK 89,777 USD 19.6%BSV 96 USD 0.0%GBP 129 USD 0.0%
Total Income 2018 458,077 USD 100%
8
The total expenses have reached the amount of $ 503,605 USD in 2018. The main dominating expense category was Development and operations in the local territory, including the program of Liberland on the Water, representing more than half (53.8%) of total expenses. Travelling & diplomacy, together with Conferences & events representing 22% of the totalexpenses. The remaining (24%) of expenses were used for the offi ce administration, including IT and other external services such as lawyers and promotions.
FINANCIALS
EXPENSES
Development and opera ons in the
territory138,399
27%
O ce & Administra
39,9808%
Travelling & Diplomacy
93,98019%IT
23,0545%
Legal & other external services
21,7134%
Conferences, events, pr on, represent
a on18,726
4%
Assets & Equipment (LL on water)
132,37826%
Other Expenses and Fees
35,3757%
Expense categories 2018
Expenses per category AmountCurrency
equivalent% Share
Development and operations in the territory 138,399 USD 27.5%Office & Administration 39,980 USD 7.9%Travelling & Diplomacy 93,980 USD 18.7%IT 23,054 USD 4.6%Legal & other external services 21,713 USD 4.3%Conferences, events, promotion, representation 18,726 USD 3.7%Assets & Equipment (LL on water) 132,378 USD 26.3%Other Expenses and Fees 35,375 USD 7.0%
Total 503,605 USD 100%
9
In the annual comparison, the expenses are growing steadily every consecutive year, fully in correlation with growth of income.
FINANCIALS | EXPENSES YEAR OVER YEAR
$210,244
$378,959
$503,605
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
2015-2016 2017 2018
Operating expensesyear over year
2015-2016 2017 2018Operating expenses 210,244$ 378,959$ 503,605$
10
The Liberland Merit is an unique evaluation token system, rewarding any contributionand energy coming into Liberland for international recognition and settlement in the territory. After registration, anyone can contribute either by donation, by labour or any other acceptable way.
The total amount of Liberland Merits issued within 2018 has reached 1,657,227 LLM. With the cumula-tive values from 2015, the total amount of issued Merits reached the amount of 3,525,763 LLM as of 31st of December 2018.
All donations and most of the third-party related expenses have been rewarded with Merits by 1:1 to USD equivalent. The contribution through labour or people’s activity has been used roughly twice more frequently than the fi nancial contribution, as per the chart below.
FINANCIALS
LIBERLAND MERITS
Financial contribution equivalent
LLM 458,077 27.3%
Labor & effort evaluation
LLM 1,217,200 72.7%
Category Amount % Share
Financial contribution equivalent 458,077LLM 27.3%Labor & effort evaluation 1,217,200LLM 72.7%
Total Liberland Merits issued in 2018 1,675,277LLM 100%
11
FINANCIALS | LIBERLAND MERITS YEAR OVER YEAR
$852,059
$1,850,486
$3,525,763
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
31.12.2016 31.12.2017 31.12.2018
Balance of issued Merits
Year Incremental LLM Cummulative total issued
2015 -LLM -LLM 2016 852,059LLM 852,059LLM 2017 998,427LLM 1,850,486LLM 2018 1,675,277LLM 3,525,763LLM
31.12.2016 31.12.2017 31.12.2018Merits issued 852,059$ 1,850,486$ 3,525,763$
12
FINANCIALS | LIBERLAND MERITS YEAR OVER YEAR
LIBERLAND MERITS AND THE UTILITY
As a result of postponing the Liberland Merit ICO and fi xing the mechanism for unlocking Merits into year 2019, all Merits remained locked for voting (0% unlocked for trading) by the end of 2018.
Year
20152016 852,059LLM 100% -LLM 0%2017 1,850,486LLM 100% -LLM 0%2018 3,525,763LLM 100% -LLM 0%
Locked (staked) for voting Unlocked (unstaked) in circulation
Locked (staked) for voting
100.0%
13
The strategy for managing Liberland fi nances has always rested onfollowing four key pillars:
Voluntary taxation
No government debts
Minimal government expenditures, no fi scal policy
Free competition of currencies, no monopoly legal tender
Internal structure of Liberland Ministry of Finance
The Ministry of Finance has been internally divided into three main sections, followed by internal structure of three departments.
Section of Strategic Planning defi nes the Liberland fi nance principles and follows the key libertarian princi-ples of free economy, free trade, and minimal government interference in fi nancial matters. This framework also means an attractive environment for business and for Liberland investors.
Section of Monetary and Macroeconomic Issues is responsible for the monetary topics. The defi ning task is to utilize Blockchain technology and maximize the potential of the Liberland Merit as a global cryptocurrency.
Mr. Hollis Hedrich
Head of the Department of Monetary and Macroeconomic issues
Section of Financial operations takes the responsibility for cash management, accounting, controlling, budgeting, reporting, and auditing. Most of the operating agenda is together with IT department prepared to be done automatically and transparently online with minimal human input required.
MINISTRY OF FINANCE
STRATEGIC GOALS AND ORGANIZATION
14
LIBERLAND ECONOMIC ADVISORY COUNCIL
Apart from the three ministry departments, the Liberland Economic Advisory Council has been com-pounded as an external independent advisory board. This committee represents an independent advisory body of ultimately 5-15 international professionals, whose expertise, opinions or abilities are valuable for Liberland’s development. They include experts in free-market and modern fi ntech decentralized solutions.
The Council has currently 5 members serving as offi cially appointed, while several other highly respected names are in negotiations by the end of 2018. The unoffi cial list is much larger.
LIBERLAND KEY EXTERNAL VENDORS
For executing our fi nancial strategy, we relied ona range of external providers:
MINISTRY OF FINANCE STRATEGIC GOALS AND ORGANIZATION
Mr Dominik Stroukal Mr Martin Panek
Mr Alexander Borodich Mr David Orban Mr Vladimir Pikora
15
KEY TOUCHPOINTS OF THE
MINISTRY OF FINANCE
Liberland is using a multi-currency and multi crypto-currency bank accounts held with Bitcoin Suisse, a Swiss-based leading crypto-fi at bank. For outgoing payments in crypto, we
use crypto hot wallets and external payment services for IBAN transfers. Online payment gateways are also used for payments acceptance as well as PayPal for both incoming and
outgoing payments.
PAYMENTS AND CASH MANAGEMENT
Liberland’s BTC and FIO bank account are both transparent and available online. The proc-ess is also supported by Swarmops, a software solution for automation of the accounting and
invoicing processes.
REPORTING AND ACCOUNTING
Liberland’s budget is projected for a long-term strategic period, always updated for the one year period ahead and applied on short-term rolling basis. The trend we would like to
achieve is high assignment levels, i.e. contributions dedicated for specifi c activity, project or facilities from the open budget.
BUDGETING
Liberland is successfully providing incorporation of international business companies (Ltd). Several hundreds of companies are already benefi ting from Liberland jurisdiction in their
international business operations.
BUSINESS INCORPORATION
The majority of Liberland funds is held with Bitcoin Suisse, operational funds are trans-ferred and diversifi ed into cold storage and operative hot wallets regularly.
Liberland fi nancial assets are exposed to so-called currency risk (appreciation or deprecia-tion of cryptocurrencies), which is rather accepted than hedged. This has resulted in ad-
ditional profi ts due to long term appreciation of cryptocurrencies.
TREASURY AND FINANCIAL RISKS
Banking in Liberland and banking for Liberland companies and citizens, including payment cards still represents an open opportunity. Although travelling on Liberland passports is ac-cepted by border offi cials in many countries, banking in Liberland still remains a challenge
for incoming entrepreneurs.
COMMERCIAL BANKING
IN LIBERLAND
Liberland Merits is a reward system (see above) which has proved to be a motivating model for energy coming into Liberland.
The major part of Liberland Merits public listing, as well as Merits-based decentralised vot-ing (DAG) was prepared in 2018 with completion in 2019. The tokenization process should lift
the country to its next evolutionary phase.
LIBERLAND MERITS (LLM) AND
TOKENIZING THE COUNTRY
No offi cial statistics such as Gross National or Domestic Product (GNP, GDP) are held by the Liberland Ministry of Finance.
When measuring all current Liberland citizens and companies, we assume the volumes of tens or hundreds of millions USD as annual Liberland GNP. Signifi cant impact on the GDP on the
whole region has been calculated by the Libek Institute in an independent study predicting an incremental +0.5% GDP to Croatia’s and Serbia’s total GDP. Liberland Chamber of Commerce
is also supporting companies to extend their production to Apatin Free Trade Zones.
GDP/GNP AND MACROECONOMIC
RELATIONS
Liberland has built up a very strong and complex network of over 100 representative offi ces on 5 continents. The primary mission of the representative offi ces is to develop Liberland’s
ideas and support broader recognition. In synergy with the Chambers of Commerce they would be able to utilize the business potential of businesses around Liberland.
The Chamber was established by 10 initial members in 2018 and has already reached several interesting partnerships on their mission and attracted fi rst business to Liberland, from
both crypto and traditional business.
CHAMBERS OF COMMERCE
Long term fi nancial stability of Liberland consists of 5 main pillars
• Revenues from the donations and Merits monetization• Revenues from citizenship and e-residency• Revenues from companies and other registries• Revenues from land owned• Other streams such as merchandising and other income
E-RESIDENCY AND OTHER STATE REVENUE STREAMS
