MiamiCoin, a new programmable crypto token, could earn "millions of dollars" for the city, according to Mayor Francis Suarez.
This new funding could be used for a variety of public services, including homelessness response and policing.
CityCoins allows users to mine coins to support a city – 30 percent of the yield is collected in a wallet reserved for the local government.
$MIA is the first token launched by CityCoins but there are plans to roll them out in more cities in the US and beyond, based on community demand.
CityCoins creator Patrick Stanley said:
"We're confident that MiamiCoin will demonstrate to other cities that adopting new technologies can propel local initiatives, improve city infrastructure, and more."
The City of Miami recently adopted a resolution for the city manager to carry out due diligence on accepting the money raised through MiamiCoin.
Suarez said the initiative could be part of the city's focus on "differentiating our economy" and making Miami a hub for cryptocurrency companies.
How it works
CityCoins are powered by Stacks (STX), a protocol that enables smart contracts on the Bitcoin network.
Coins like $MIA are mined by forwarding STX tokens into a CityCoins smart contract. Okcoin is the first exchange to list MiamiCoin.
Thirty percent of the STX forwarded by miners goes into a special wallet reserved for the city to use – if the mayor decides to claim it.
The remaining 70 percent of STX goes to the CityCoin holders who 'stack' their CityCoins. Stacking requires that holders lock their CityCoins for a certain time to earn their STX rewards. Holders can then further stack that STX to generate Bitcoin rewards for themselves.
The wallet will be automatically converted into dollars and made available to go directly into a city's general fund.
CityCoins are also programmable, meaning developers can create applications based on them.
Feedback loop
While a handful of mayors, like Suarez and others, are beginning to explore the role of cryptocurrencies in their local economy, others will undoubtedly be wary of its unregulated nature and volatility, and reluctant to wade into waters that are uncharted for local government.
However, if programmes like CityCoins take off in a major way – and it's a big if – mayors could find themselves with no choice but to engage.
Muneeb Ali, Founder of the Stacks protocol, said: "Cities can embrace Bitcoin and crypto faster than nations – big cities with billion-dollar budgets can start to operate more like the private sector by diversifying their cash balances into Bitcoin. Beyond Bitcoin holdings, cities can experiment with crypto to engage their citizens and [incentivize] local participation, much like what we're seeing in the city of Miami."
He added: "CityCoins like MiamiCoin introduce a new feedback loop between cities and the people they serve. Citizens and city stakeholders can leverage city-based tokens to cast their vote via the markets, ultimately using CityCoins as a new mechanism to reflect community sentiment on local policies."
Energy concerns
Cities that opt into cryptocurrencies will also need to square concerns about energy consumption with environmental commitments amid a climate crisis.
Stanley said he is an environmentalist and claims CityCoins are "environmentally friendly" because Stacks recycles bitcoin's proof of work, which is the most energy-intensive aspect of the process.
Ian McKenzie, an international blockchain advisor at law firm Osborne Clarke said CityCoins is "certainly a novel concept".
"I'm not aware of another token that promises to deliver benefits to a city in such a direct way," he commented. Whether it's significant or not remains to be seen – as with any new token, the question will be whether the crypto market, and more generally the relevant city dwellers, see the benefit. Clearly, there will need to be a critical mass of participants to deliver meaningful benefits to cities, especially ones the size of Miami.
"If there is a critical mass of participants and cities find their coffers full of valuable tokens, it's not a huge stretch to imagine how that will benefit residents."
But, McKenzie added: "The value of STX appears to be pegged to Bitcoin which, as we have seen recently, can be extremely volatile and may make it more difficult to understand and predict the value of participation."
Economic development innovation
Many cities are looking for innovative approaches to boost funding, particularly following the pandemic.
The City of Berkeley in California is pursuing the idea of 'microbonds', an alternative to municipal bonds which would allow individuals to invest much smaller amounts, with the administration of the scheme managed via blockchain.
Cities in North Texas are evaluating options to monetize their data and assets such as land, buildings, lighting and roads to generate new revenue.
Meanwhile in the UK, the Bristol Pound local currency is being reinvented as Bristol Pay – a city-focused alternative to online payments. The local payment platform would capture transaction fees – which would typically go to the likes of PayPal, Apple Pay, Mastercard and Visa – and plough them back into local social and environmental projects.
This article first appeared on Cities Today.
Risk Warning: Cryptocurrency is a unregulated virtual notoriously volatile instrument with a high level of risk. Any news, opinions, research, data, or other information contained within this website is provided for news reporting purposes as general market commentary and does not constitute investment or trading advice.
