Now They’re Into Crypto

Montenegro Opens the Door

Mega yachts moored in Tivat, pre-Ukraine invasion.

By Natalie Sarkic-Todd

It was just a matter of time. Montenegro has been a foreign money magnet since the Yugoslav wars ended, especially since it gained independence in 2006.

The Balkan state is a low-tax, low-cost euro haven that borders Albania, Bosnia, Croatia, Kosovo and Serbia, with a coastline just a boat ride from Italy and a car drive to Greece.

It’s also an EU candidate country that offers investment returns without the regulatory restrictions of membership.

Montenegro’s fortunes have matched the ups and downs of the global economy.

First came the Russians, and later Azerbaijanis, with their post-Soviet oil and gas boom, the Saudis and the United Arab Emirates with their petrodollars, the Irish with inflated real estate cash (until the Celtic Tiger’s economy crashed), and the Chinese with their belt and road state loans.

That’s not to exclude German and Hungarian investment in telecoms, Austrians in banking, Greeks in tourism, Italians in energy, Israelis in retail, Turks in construction, ongoing investment from Serbia, and so on.

Porto Montenegro is perhaps the most visible symbol of the regenerative power of wealth.

It was funded by a Rothschild consortium led by a Canadian gold mining magnate who transformed the shipyard of Tivat into a harbour for oligarchs and their mega yachts.

That is until the invasion of Ukraine and Montenegro’s adoption of EU sanctions.

Built on the condition it included the reconstruction of the town’s waterfront, the former royal resort has regained its allure.  Thus, it’s no surprise that cryptocurrency has made its appearance.

And that’s where our story begins.

In 2019, the UK’s Brexit cheerleader, Nigel Farage was spotted in Porto Montenegro.

At the time, I didn’t think much of it other than he was probably chasing after money with the yacht set.

George Osbourne, former UK chancellor, and Peter Mandelson, formerly Britain’s EU trade commissioner, had been spotted on Russian oligarch Oleg Deripaska’s yacht off Corfu years before.

Farage was late to the party.

Vijesti reported this month, however, that Farage had been in the company of George Cottrell, his former chief of staff, who had been arrested in 2016 in the US. He was convicted of money laundering, took a plea bargain, and was released in 2017.

Cottrell is now accused of running an illegal cryptomat out of Tivat and using it to fund the election campaign of the country’s Europe Now movement (PES). He’s apparently been living in Porto Montenegro’s five-star hotel and left Tivat by private plane just days before the story broke.

Why does this matter? Because the leader of Europe Now, Milojko Spajić,  is set to become prime minister and form the next coalition government.

Spajić, a former currency trader, is accused by political rivals of associating with South Korean cryptocurrency dealer Do Kwon, who was arrested on arrival at Montenegro’s main airport in March.

Do Kwon is wanted by South Korean and US authorities for allegedly defrauding investors of billions of dollars since his Terra/Luna cryptocurrencies collapsed in 2022. He is currently in prison, awaiting extradition. 

The election campaign exploded into scandal when Do Kwon reportedly sent a letter to caretaker Prime Minister Dritan Abazović, which implicated Spajić.

Abazović confirmed he had received the letter but did not clarify its contents or deny the speculation about his rival.

A self-proclaimed anti-corruption champion, Dritan Abazović has thrown accusations of corruption around since he lost a vote of no confidence and has been fighting for his political survival.

Spajic claimed he was instrumental in arresting Do Kwon and accused the premier of deploying smear tactics just days before the election. He reminded voters that Abazović appointed the head of the Revenue and Customs Administration arrested in a cigarette smuggling scandal.

With the election turnout a record low at 56%, no doubt due to voter fatigue, the Europe Now (PES) vote came in lower than predicted.

Still, it was enough to gain the largest number of parliamentary seats,  though not a governing majority.  Spajić ruled out forming a coalition with the previously dominant Democratic Party of Socialists (DPS), who came in second and now added Abazovic’s URA to his blacklist.

He will have to do a deal with his previous coalition colleagues and include minority parties to make up the required number of seats. However, Spajic needs to get his skates on, as an investigation is underway into a 750 million euro government loan he secured as finance minister.

Once sworn into parliament, he will be immune from prosecution. Meanwhile, the cryptocurrency caravan continues to make its way.

As reported by The Battleground last month, Spajić and Abazović together visited Ethereum cryptocurrency founder Vitalik Buterin when he gathered his followers in another of Montenegro’s luxury resorts.

After holding court on the coast for several weeks, Buterin moved inland for a conference at Podgorica’s private university.  Shortly after, an online offer for investment in his unbacked Ether cryptocurrency was issued.

I watched and waited for local media to report on these cryptocurrency gatherings. Nothing came of it. That was until the Do Kwon accusations emerged when they woke up to the possibility of a domestic scandal.

Encouragingly, the older generation seemed not to be taken in.

I chatted with a group of retirees in a local cafe, including a former bank employee and a journalist discussing the breaking Do Kwon story.

They were unconvinced by cryptocurrency and unimpressed by the claims and counterclaims of the politicians.

Coincidentally, the cafe’s restaurant had been the caterer for the latest cryptocurrency conference, and so was unable to offer its usual menu. I couldn’t help thinking there was a lesson in that.

The younger generation may be a different story, however.

Cryptocurrency appeals to digital natives with limited experience in the real economy. They are tempted by the gold rush vibe and the promise of big returns.

Aside from the followers of Buterin, in Montenegro, I came across smart-suited young men driving expensive cars who seemingly spent the day (and night) on their laptops in new offices with darkened windows.

Back in Brussels, I was surprised to learn a young man was planning to set up a cryptocurrency operation in Montenegro. It raised alarm bells.

In our internet-connected world, word gets around fast.

Is Montenegro ripe for cryptocurrency? No doubt.

It has a new political class intent on creating a cryptocurrency hub.

It has a tech-savvy younger generation keen to find ways to make money.

And it produces affordable hydroelectric energy, which is a perfect match for electricity-hungry crypto machines.

Is Montenegro ready for the potential economic fallout? Absolutely not.

The country’s post-Covid finances are fragile. And it’s undergone three changes of government in as many years.

Montenegro will need careful management of the recovering (real) economy. And it will require regulation, such as the EU’s new rules on crypto-assets.

A UK parliament report states, “Unbacked crypto assets (also sometimes referred to as ’cryptocurrencies’) are not supported by any underlying asset and so have no intrinsic value.”  It recommends regulating them like gambling.

Not just in first-world economies but in developing ones too, where get-rich-quick schemes can be incredibly tempting – and destructive when they fail.

The recent scandals are just the tip of the iceberg.

Photograph courtesy of the author. All rights reserved.