Money for nothing: Cities’ crypto push attracts fans and critics

FILE - Miami Mayor Francis Suarez hosts a conference with local artists at the Bakehouse Art Complex, on the emergence of non-fungible tokens (NFTs) in the art world, July 27, 2021, in Miami, Florida.  A small but well-publicized group of cryptocurrency enthusiasts called City Coins is asking Miami and New York to accept the equivalent of millions of dollars into a new cryptocurrency scheme that has political leaders in other cities that are demanding to participate in the agreement.  (AP Photo/Lynne Sladky. File)

FILE – Miami Mayor Francis Suarez hosts a conference with local artists at the Bakehouse Art Complex, on the emergence of non-fungible tokens (NFTs) in the art world, July 27, 2021, in Miami, Florida. A small but well-publicized group of cryptocurrency enthusiasts called City Coins is asking Miami and New York to accept the equivalent of millions of dollars into a new cryptocurrency scheme that has political leaders in other cities that are demanding to participate in the agreement. (AP Photo/Lynne Sladky. File)

PA

A small group of cryptocurrency enthusiasts have an offer they hope American cities can’t refuse.

The City Coins group is asking Miami and New York to accept the equivalent of millions of dollars in a new cryptocurrency, and at least some of the money is real: Last week, Miami Mayor Francis Suarez, announced that City Coins transferred $5.25 million to the city.

The dizzying proposal has leaders in other cities, like Philadelphia and Dearborn, Michigan, clamoring for a deal they hope can change budgets, much in the way some cities and states had hoped lotteries or legalized gambling would be a solution to financial problems.

This hype also benefits people who get into new currencies early, fueling arguments that cryptocurrency startups too closely resemble pyramid schemes.

When Suarez announced in November that his city would be joining the group, one of its executives, Patrick Stanley, told cryptocurrency price index and information company CoinDesk TV that Suarez “just transforming his city into an oil-producing country that gives returns in Bitcoin to his citizens, like that, it’s incredible.

That hasn’t happened and there are a lot of hurdles to jump through, both legal and technological, before that’s possible.

For starters, the value of cryptocurrencies can fluctuate significantly. Popular cryptocurrency Bitcoin lost almost half of its value between November and late January, falling from a high of $67,500 to just over $35,000; it has since bounced back a bit to around $43,000. The anonymity of cryptocurrencies also makes them popular with criminals. Scams are also plentiful in the world of cryptocurrency trading.

The group’s proposal develops blockchain technology that supports Bitcoin and other cryptocurrencies. People who want to support the City of Miami can invest in Miami Coin (just like anyone else); part of their investment is then channeled to the city. The rest is split among other Miami Coin investors. The way the system is designed favors people who make big investments and people who get in early.

If everything goes according to plan, the prices of the new cryptocurrency increase and the city gets free money.

Participants in the City Coins project hope that Miami residents will eventually be able to hold their ID, pay taxes, or vote using the blockchain technology on which Miami Coin is built, increasing the value of the coins. The contract that City Coins signed with Miami does not mention any of these possibilities.

The proposed arrangement is also unusual from an economic development perspective, in part because City Coins claims it is not a business but rather some sort of collective. Its website does not list any employees or contact information other than a link to the Discord messaging app. It is registered in Delaware as a non-profit organization. Online records show he is not registered in Florida.

Contacted on Discord, community manager Andre Serrano estimated the number of people involved with City Coins to be between 10,000 and 15,000, though he’s based on City Coins Twitter followers and people who joined. the Discord chat.

In a statement, Suarez said the city cannot legally hold cryptocurrencies. So for now, he said, “City Coins is acting as the depository for Miami’s rewards until they are converted into dollars and officially offered to the city,” of which the first 5, $25 million was Feb. 2.

For scale, the City of Miami’s operating budget passed in October was over $1.3 billion.

“We have lots of ideas for how we can spend the money and we fully intend to listen to community feedback on how to deploy the funds,” Suarez said in a statement, suggesting that education was a priority.

For John Forrer, a research professor at the George Washington School of Public Policy, this unprecedented arrangement presents potential pitfalls for any municipality that signs up.

“There’s so much uncertainty and it’s so new, are you sure you’ve investigated all the risks and have a way to manage them whatever they are?” he said, adding that it is important that the city can hold the outside party accountable if necessary.

In City Coins’ contract with the Miami, Stanley is listed as a point of contact with an address in a Los Angeles mall. He has appeared alongside Suarez in interviews on Miami Coin where he is identified as the community manager for City Coins. He did not respond to questions about the structure and organization of City Coins. In public statements, Stanley said he previously worked with Stacks, the cryptocurrency ecosystem on which City Coins is built.

Liat Shetret, director of regulatory affairs and compliance policy at risk analytics firm Solidus Labs, said cities could consider blockchain technology to increase financial transparency. But she fears politicians are selling cryptocurrencies as an attention-grabbing gimmick without preparing their cities to deal with new issues like money laundering.

The nature of the blockchain means that while it is possible to see which accounts own or operate Miami Coin, the true identities of those people are not publicly visible. Money changers ask for basic information such as names, addresses, and social security numbers; it is unknown how many credentials coin creators collect. Entrants do not need to be residents of Miami.

Neither Suarez’s office, nor Stanley, nor the Stacks Foundation responded to questions about whether any of them had access to Miami Coin participants’ personal information or whether they had concerns about anonymity. people involved.

“Keeping bad actors off these platforms is crucial,” Shetret said.

While New York City Mayor Eric Adams has also been a proponent of cryptocurrencies, his administration has yet to sign off on the project, despite celebrating the launch of a New York City Coin in November.

Adams’ office did not respond to questions about whether the mayor was considering accepting funds from City Coins.

New York residents cannot currently purchase the New York coin because the only exchange that offers it is not licensed in the state. “We are optimistic that it will be approved by the middle of the year,” said Larissa Bundziak, a spokesperson for the Okcoin exchange, which has started offering the New York coin to non-New Yorkers. Yorkers – January 26.

Last week, some City Coins participants expressed disappointment with how the experiment is going so far and argued in a Discord app chat room over whether the group should launch crypto. -coins in new cities or wait for the value of coins in Miami and New York. prove themselves further.

“It’s easy to get a city to claim free money,” wrote one participant. “It takes more than that to actually deliver value,” so in the long run people have good reason to participate. ___ Associated Press writer Randall Chase in Dover, Delaware, contributed to this report.

Comments are closed.