Why Most Crypto Cities Fail

While there have been multiple attempts over the years at building “crypto cities” — special zones that rely on blockchain technology to function —most experiments have failed, and crypto executives think they know why.

One of the more recent high-profile projects was Akon City, the brainchild of Senegalese-American singer Akon. Announced in 2018, it was supposed to be a $6 billion smart city with a crypto-powered economy, but was officially abandoned in July.

Satoshi Island, a project to acquire an entire island near Vanuatu, launched in 2021 with the aspiration of creating a home for crypto professionals within a blockchain-based economy. Its last update was in July, and the project was still working to establish essential services and secure its license agreement with the island’s stakeholders.

There were also once grand plans to build a blockchain-powered city called Puertopia in the Roosevelt Roads Naval Base in Ceiba, which was also announced in 2018. But there haven’t been any meaningful updates in years.

Crypto cities are solving the wrong problems

Speaking to Cointelegraph, Ari Redbord, the global head of policy and government affairs at blockchain intelligence firm TRM Labs, said many crypto city experiments fail because they are focusing on impossible goals.

Many crypto city projects envision building an entire city from scratch that utilizes a blockchain-based economy, is funded through tokens, and is otherwise completely autonomous from wider society.

However, Rebord argued that a better opportunity lies in modernizing existing economies — embedding artificial intelligence to help analyze risk, detect fraud, drive more intelligent decision-making, and using blockchains to provide the trust layer that ensures transparency and accountability.

“The idea of a crypto city to me is already happening. It’s about upgrading the systems we already rely on. As institutional adoption grows and governments craft clearer rules, the world’s financial infrastructure is moving onchain,” he said.

“Every city will become a crypto city, not through ideology but through technology — faster, safer, and more transparent rails for moving value.”

A pure crypto city possible, but challenging

Kadan Stadelmann, the chief technology officer of the blockchain platform Komodo, told Cointelegraph that self-sovereign cities powered by cryptographic and decentralized systems are possible in an ungoverned space, such as international waters.

To succeed, he believes it requires blockchain to ensure transparency, security, and adaptability in a wide range of sectors, including energy and food.

It would also require extreme dedication and a centralized vision from the population, who must be willing to sacrifice modern conveniences until it is fully implemented.

However, it would also come with other threats, such as those from governments wanting to collect taxes and enforce local laws and would be potentially defenseless against attacks.

“Even if an individual buys an island, what are they to do if some pirates rollup on it? There’s no police on the island or military. There’s no hospital, either. A sovereign city multiplies these risks many times,” Stadelmann said.

“It could be that crypto’s vast resources are best used to improve the world we’ve already got.”

Better idea: Special crypto zone in a modern city

Vladislav Ginzburg, the founder and CEO of blockchain infrastructure platform OneSource, told Cointelegraph that crypto use in a modern city-state such as Dubai with government support would be a more viable option than starting from scratch.

“Certain cities have already done a very good job of digitizing government services, Kyiv and Dubai come to mind, so that first key step is indeed possible,” he said.

Maja Vujinovic, the co-founder and CEO of Ethereum treasury company FG Nexus, is also skeptical that a crypto city could succeed without state backing, because they would struggle with property law and governance.

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“The realistic path isn’t a new sovereign city; it’s crypto native neighborhoods within state-backed zones where licensing, AML and immigration are already solved,” he said.

“The winning ingredients are: a government partner with delegated regulation and visas, multibillion-dollar staged capital, clear crypto rules, and anchor employers in AI, crypto and biotech.”

Sean Ren, co-founder of the AI-native blockchain platform Sahara AI, believes that if a crypto city hopes to evade government control and regulation, it will be doomed.

However, a purpose-built zone inside an already established city for testing new technologies, such as tokenized property rights or AI data governance, would have a greater chance of success.

“The real opportunity isn’t in creating walled gardens for tech elites but in creating regulatory sandboxes that feed lessons back into national policy,” he said.

“A city designed to responsibly test AI training rules, data provenance standards, or token-based economies could add real value.”

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