Miami already has a lot going for it – the sunshine, the beach, the Cuban coffee. Now the city’s mayor Francis Suarez wants to put it on the map for another reason: he wants to be the first to create a new way of raising money for the city – through a new cryptocurrency.
MiamiCoin, an experiment he launched this year, could bring in so much revenue that there could be a future scenario where “Miamians would no longer need to pay municipal taxes,” the Republican told the BBC.
That is one aspiration, and beyond that, he hopes one day to be able to hand out MiamiCoin to every resident, as a kind of digital dividend.
MiamiCoin is just one part of Mr Suarez’s drive to establish Miami as a centre for cryptocurrency.
“I believe we’ve been presented a very unique opportunity to diversify our economy,” he said. “Prior to the pandemic over 60% of Miami’s economy was service sector-based. That left us particularly vulnerable to Covid and I won’t pass on the chance to change that.”
But while Mr Suarez is first out of the blocks, he’s not the only mayor in the race for crypto-capital of the US. Hot on his heels is the man about to take over next month as New York mayor, Eric Adams.
What are cryptocurrencies?
Cryptocurrencies, depending who you ask, are either about to revolutionise the global economy, circumventing national governments’ hold on finance, and putting power in the hands of ordinary citizens, or they are risky and unstable tools, that enable illegal activities, from ransomware to drug dealing.
A cryptocurrency is a digital product, created without the backing of any central bank or payment system, created or “mined” by computers running complex software programmes.
Anyone willing to invest the time and money to set up the necessary computing equipment can mine, or even establish their own cryptocurrency. They can also be bought and sold, like investing in a commodity.
The best known cryptocurrency, Bitcoin, has attracted enormous attention, has been very volatile, and fortunes have been lost and made investing in it. But many other cryptocurrencies have now been established in its wake.
Mr Adams, a Democrat, who takes office in January, has promised to make New York a crypto-hub. He has talked about city employees getting paid in cryptocurrency and wants lessons on cryptocurrency in New York schools.
Once he’d heard that Mr. Suarez had asked to get his first paycheque in Bitcoin, the New Yorker requested the same for his own first three months’ pay. Mr. Adams is backing his city’s version of a cryptocurrency,
While some of the rivalry may simply be about sending out signals, both mayors are serious about establishing their city as a hub for cryptocurrency business.
In June, Mr. Suarez hosted a Bitcoin conference in Miami that attracted around 12,000 enthusiasts including bankers, tech executives and crypto-entrepreneurs. The next one is already planned for April 2022.
And embracing the idea of a city-based crypto-token, like MiamiCoin or NYCCoin, is another way to illustrate commitment to the sector.
Anyone can mine MiamiCoin. When doing so, some of the proceeds of the mining go straight to the miner. The rest goes to a nonprofit initative that underpins the city tokens called CityCoins.
CityCoins gives 30% of the MiamiCoin generated to the City of Miami and 70% is distributed around to all the holders of MiamiCoin.
MiamiCoin, which launched in August, has generated over $20m on behalf of the city, with around 3,500 people taking part in the mining process, according to CityCoins.
It’s important to note, that MiamiCoin itself is not money, despite the name, cautions Dara Tarkowski, a financial lawyer at Actuate Law in Miami and Chicago.
“It functions much more like a security that needs to be traded and then cashed out at some point.”
“Its inherent value is purely based on supply and demand,” said Ms Tarkowski. “The tokens only have value at the time they’re cashed out, and just like a stock we never know what that is going to look like”.
None of the MiamiCoin already created has been translated into spending money for the city yet, although Mr Suarez says they are the process now of converting some it into dollars.
“We should be expecting $5m sometime in December,” he said.
Meanwhile cryptocurrency miners have already generated more than $25m in NYCCoin for New York’s digital wallet.
For now, other cities are watching to see how this experiment in digital fund-raising pans out. And opinion is divided.
Besides their volatility, cryptocurrencies come with plenty of other risks. They have long history of association with criminal activity from ransomware to drugs and there have been numerous cryptocurrency scams. Regulators are still trying to catch up with what rules to impose on what is still a nascent investment sector.
John Reed Stark, cybersecurity consultant with long years of experience at America’s top financial regulator, the Securities and Exchange Commission (SEC), as well as in academia, thinks the crypto-mayors could be riding for a fall.
“Ultimately whatever they do with crypto is going to crash and burn and is going to be a disaster,” he predicted. He views cryptocurrencies as essentially an elaborate Ponzi scheme, “the ultimate hustle”, based on its advocates ramping up interest in a succession of new hyped up projects.
“What they’ll realise soon is, the emperor has no clothes. A bank regulator or federal regulator will come along and hopefully intervene and say you cannot do this, you are facilitating criminal enterprises, and you are peddling products that have no intrinsic value,” he said.
The SEC is looking closely at cryptocurrency activities and there’s good reason for that, said Mr Reed. In his view accepting cryptocurrency is “akin to trading in blood diamonds”.
Across the political spectrum politicians have called for stricter regulation, from Elizabeth Warren, the Democratic senator to Donald Trump, the Republican former president.
Mr Suarez said he recognised the risks, but said his administration “exhausted all avenues of due diligence”.
And other outsiders are praising the mayors’ readiness to innovate.
“Lots of municipalities make all sorts of investments, in a variety of different assets. Some of them invest millions of dollars in real estate, others in bonds,” said Ms Tarkowski. “To me this is just another interesting investment vehicle and frankly quite creative for a municipality to do”.
The view of cryptocurrencies as something shadowy and criminal is outdated now that so many people are investing in the sector, she argued.
City mayors would be “foolish” not to look at any new sources of income, if it could help supplement their funds, Ms. Tarkowski said.
“I would applaud Mr. Suarez for some ingenuity and creativity and trying something new,” she said.