City government funded by cryptocurrency

At least one leader in Miami thinks the city can raise substantial revenue through partnerships with cryptocurriencies:

Photo by David McBee on Pexels.com

The lofty idea is the byproduct of a cooperation with CityCoins, a nonprofit that allows people to hold and trade cryptocurrency representing a stake in a municipality. By running software on their personal computers, CityCoins’ users mint new tokens and earn a percentage of the cryptocurrency they create. A computer program automatically allocates 30 percent of the currency to a select city, while miners keep the other 70 percent.

Since the nonprofit unveiled “MiamiCoin” in August, it has sent about $7.1 million to Miami. (City commissioners agreed to accept the donations on Sept. 13.)

While the program is still in its infancy, Suarez (R) estimates the effort could generate as much as $60 million for Miami over the next year and ultimately “revolutionize” how the city funds programs that address poverty and other societal issues…

Over the past year, several financial and tech firms set up offices in the city, including Goldman Sachs, SoftBank and Blackstone, according to Suarez. In June, the crypto wallet Blockchain.com announced it was moving its headquarters from New York City to Miami, citing the city’s “welcoming regulatory environment serving as a hotbed of crypto innovation,” the company revealed in a news release. That same month, the stock-trading platform eToro announced plans to establish offices in the city.

In many ways, this is a continuation of what cities have tried to do for decades: diversify their tax base and/or become a leader in a certain industry or sector, particularly in a new area. All of this helps bring in new tax revenues, jobs, and provides a certain status for the city.

Because of its growth in recent decades plus expectations that it will continue to grow, many American cities want to attract tech companies and grow the tech sector in their own community. If cryptocurrency is the new hot thing, everyone wants that.

On the other hand, chasing after the new thing does not always work out. Some cities will succeed in becoming cryptocurrency hubs, others will not. In a few years or decades, we can better assess Miami’s efforts. How much does cryptocurrency, or any tech business, need to be anchored in a particular place as opposed to conducting their business online or through a more distributed set of locations?

Additionally, cities are also interested in ways to generate easy revenue. When I read this article, I also thought of tourism. Many cities want to play in this game because there is a lot of money involved and visitors come, spend money, and then go home and do not require the long-term services that come with population growth. But, tourism is also dependent on factors like weather, pandemics, broad economic patterns, and more. Is cryptocurrency the newest easy money?

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