Updated Jan 23, 2022 - Technology

Mayors see cryptocurrency as a way to address income inequality

Illustration of a torn hundred dollar bill revealing binary code beneath

Illustration: Sarah Grillo/Axios

At the U.S. Conference of Mayors' meeting in D.C. this week, there's buzz around the idea of giving cryptocurrency accounts to low-income people.

Why it matters: Cities have been experimenting with newfangled ways to address income inequality — like guaranteed income programs — and the latest wave of trials could involve paying benefits or dividends in bitcoin, stablecoin or other digital currencies.

Driving the news: Mayor Francis X. Suarez of Miami — a leading champion of crypto — has vowed that Miami will be "the first city in America to give a bitcoin yield as a dividend directly to its residents" through its MiamiCoin initiative, which started in 2021 as a way to raise revenue for the city.

As the new president of the U.S. Conference of Mayors, Suarez has been proselytizing for crypto at this week's meeting — and tells Axios that he's been getting traction.

  • Suarez says that the mayors of New York, Cleveland and Atlanta were among those who were enthusiastic about "how bitcoin can be transformative in their cities."
  • His pitch: "Most people who are poor have their money in a bank account that earns negligible interest," Suarez tells Axios. "With the rapid inflation that we have because of rampant government spending, the people are losing purchasing power — they're actually becoming poorer."
  • "By contrast, if you had a crypto account, you could get a U.S. stablecoin" — a form of digital currency pegged to assets like U.S. dollars or gold — with a yield of perhaps 5% to 6%.

Mayor Suarez is the first U.S. mayor to take his salary in crypto. New York City's new mayor, Eric Adams, is the second.

  • The African American Mayors Association is starting to plan a meeting about crypto, so that members can learn about how it works and its potential benefits to their citizens, Phyllis Dickerson, CEO of the group, told Axios on Thursday.

But, but, but: Critics of the idea of paying people in crypto — including a proposal by Suarez to pay city workers in bitcoin — point to the volatility of these currencies, which are unregulated and historically unstable.

  • Investing in cryptocurrencies is considered so risky that some people liken it to gambling.
  • These are complex financial instruments with murky tax rules and no FDIC backing.

Jamie Dimon, the CEO of JPMorgan Chase, is a prominent crypto detractor: “Cryptocurrency has no intrinsic value,” he said in a recent interview with CBS Boston. “There’s so much speculation taking place in stocks and securities and crypto and stuff like that — I would be very careful.”

What they're saying: The details of how municipal cryptocurrency accounts would work have yet to be hammered out, but Suarez has gained some adherents. "I think he's spot on with this sentiment," Mayor Justin Bibb of Cleveland tells Axios.

  • "I'm someone who owns a little bit of crypto, and what you're seeing with the rise and evolution of crypto is the rise and democratization of wealth creation," Bibb says.
  • Bibb says that with cryptocurrency he sees "a unique opportunity to reimagine how we think about financial inclusion, financial democracy."
  • "I have been really inspired by Mayor Suarez's leadership in this issue."

Details: Miami has successfully courted the crypto industry — most notably through its own cryptocurrency, MiamiCoin, which, in Suarez's vision, is meant to raise enough revenue that the city could stop levying taxes.

  • The program is a collaboration with CityCoins, "a nonprofit and opensource protocol that allows people to hold and trade cryptocurrency representing a stake in a municipality," per the Washington Post.
  • "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 users get the other 70 percent," the Post explains.
  • The Miami Herald reported in November that the program has already netted the city more than $21 million.

“We’re going to create digital wallets for our residents, and we’re going to give them Bitcoin directly from the yield of MiamiCoin,” Suarez is quoted in the Herald as saying.

The bottom line: If MiamiCoin is bringing in newfound revenue, expect other cities to follow suit and issue their own cryptocurrencies —and potentially help their citizens get set up with digital wallets.

  • "I'm excited about the fact that our city has differentiated itself as a crypto capital and as a bitcoin capital," Suarez tells Axios.

Editor's note: This story was originally published on Jan. 21.

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