Miami Mayor Francis Suarez has a plan to transform the city into the world’s “cryptocurrency innovation hub,” and one of the outcomes, he claims, could be a metropolis free from taxes.
Since CityCoins unveiled “MiamiCoin” in August, the protocol 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.
“When you think about the possibility of being able to run a government without the citizens having to pay taxes. That’s incredible,” Suarez said, adding that the partnership creates a “counternarrative” to the idea that city programs require raising taxes or “private sector philanthropy.”
CityCoins fits snugly into Suarez’s overall direction in Miami, as a business-friendly environment welcoming tech companies that want to benefit from warm weather and low state taxes. The mayor says he is having discussions with mining companies about setting up operations near a South Florida power plant and ultimately wants to rebrand the city from a travel destination to a technology hub.
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.
Miami is attempting to integrate cryptocurrency into city government. According to Suarez, it is exploring allowing city employees to get paid in bitcoin and allowing residents to pay some fees and taxes in bitcoin. The city held the world’s largest bitcoin conference in June for thousands of enthusiasts.
CityCoins describes itself as more of a collective than a business. It’s the brainchild of the platform’s community leader, Patrick Stanley, who says CityCoins’ strategy is guided by cryptocurrency enthusiasts online who communicate on the chat platform Discord and vote on what’s next.
CityCoins is a community "that is trying to bring something into existence, that didn’t exist before, for the betterment of all citizens in the respective cities,” Stanley said.
Cryptocurrencies are pieces of digital code that allow people to buy, sell and build wealth. Miners create new cryptocurrencies by running software on networks of computers, while the code works to solve mathematical problems adding the transactions to a public ledger, known as a blockchain. New tokens are awarded in a lottery-like system to people running the software.
MiamiCoin relies on a base cryptocurrency called Stacks. As miners mint Stacks and forward the tokens into CityCoins, MiamiCoins are generated. Miners who send the most Stacks have the best chances of being awarded new MiamiCoins.
People interested in buying or trading MiamiCoin can find it on the crypto exchange Okcoin, where the token traded for just over two cents ($0.026) this week.
The tokens can be bought or mined by people wanting to support Miami, and they gain value if the demand is higher than the supply. In a world where an unlimited number of new cryptocurrencies are popping up, CityCoin’s launch benefits from increasing attention to its effort, potentially increasing the value of the currency.
“It’s a way of getting people to mine your currency as opposed to the hundreds of others out there,” said David Sacco, an economics professor at the University of New Haven.
But Miami’s vote to accept the tokens as contributions was a pivotal moment for the cryptocurrency industry, which is seeking to gain momentum and utility among broader society as it faces increased scrutiny from regulators. Lawmakers have voiced concern over what happens when shadowy financial instruments, not subject to normal oversight vehicles, grow without control of regulators.
Miami’s reserve wallet automatically converts deposited tokens into U.S. dollars, with city officials deciding when to cash out. Anyone can download MiamiCoin software to compete for rewards, which creates legal considerations for the city, experts say.
“One thing to consider is who you are accepting donations from,” said Max Dilendorf, a New York attorney at Zahn Law Group who focuses on digital securities. “I could be a world criminal sitting somewhere in Iraq or in Russia and have a frontman making a donation through MiamiCoin.”
The city is not spending the money for six months to insulate itself from fraud and misuse and to give city officials time to respond if issues arise, according to Suarez. “There are scenarios under which we would pull back,” the mayor said. “What if there’s some fraud involved, or if people sue? We have no reason to believe that is happening. But anything can happen. And we want to be careful.”
Miami’s high-profile attempts to attract cryptocurrency investment drew CityCoins, and there’s now competition among cities to create similar partnerships, Stanley said.
San Francisco, an epicenter of the tech industry, is probably next to get a CityCoins token, according to CityCoins website, which has a tool that lets people vote for where to show up next.
“The community is actively chatting online,” Stanley said. “Do we launch in New York, do we launch in Austin, San Francisco, Singapore or Seoul.”