Mayors Taking Pay in Cryptocurrency Embrace CityCoins Fundraising
SAN ANTONIO — Mayors Eric Adams of New York City and Francis Suarez of Miami, Florida, who have publicly championed the benefits of cryptocurrency, now have turned to the digital tender as a means of public fundraising.
CityCoins are a type of cryptocurrency operating on a programmable Bitcoin network blockchain known as Stacks, which enables users to automate and execute contracts when certain conditions are met. When crypto miners generate “STX,” the blockchain’s native currency, they can forward 30% of the revenue directly to a digital wallet reserved for each city included in the CityCoins ecosystem.
Essentially, one can acquire a city’s unique digital tokens through the process of purchasing Stacks tokens through a cryptocurrency exchange before forwarding the tokens to CityCoins, and then automating CityCoins to mine the currency, according to the CityCoins website. CityCoins can either be mined to generate profit or “Stacked,” meaning the holder locks their tokens in order to earn rewards that can be exchanged for Bitcoin.
This stream of revenue has yielded over $15 million dollars to the city of Miami, Florida, and over $19 million to New York City as of Jan. 25, according to their publicly viewable digital wallets. Adams and Suarez both announced that they had chosen to convert their next three paychecks into cryptocurrency, signaling their shared faith in the future of the digital assets.
“New York is the center of the world, and we want it to be the center of cryptocurrency and other financial innovations,” Adams said in a written statement. “Being on the forefront of such innovation will help us create jobs, improve our economy, and continue to be a magnet for talent from all over the globe.”
CityCoins are a private enterprise, however, and are not part of a formal public-private partnership with the city governments. Instead, the coins were simply announced by the company as initiatives and then received mayoral endorsements after the fact.
While city councils are solely responsible for the local government’s financial matters, they don’t appear to have any role in the funding structure of the crypto initiative. CityCoins’ next target for a unique digital token is Austin, Texas, which Mayor Steve Adler expressed interest in during an interview with Fox Business.
Although cryptocurrency remittance has been an issue explored in the private sectors of the economy, it isn’t surprising to have come up in the public sector, said William Luther, associate professor of economics at Florida Atlantic University.
“We have some mayors who want to gain some attention for their cities, and perhaps also encourage financial technology companies to relocate,” Luther told The Well News. “That would boost local tax revenues and enable the mayor to allocate more funds to his or her constituents.”
Adams said during the SOMOS Puerto Rico Conference in November that in addition to converting his own paychecks into digital currency he would explore methods to allow residents of New York to have the choice of receiving their own pay in Bitcoin and other cryptocurrencies. Despite Adams’ enthusiasm for the digital currency, it’s unclear whether the trend of crypto pay will catch on to a wide degree given the limited applicability of the tender.
It’s difficult to estimate the future value of cryptocurrencies in general, Luther said. This is because their value depends on how the issuer governs the supply and how much the demand for a particular cryptocurrency will be.
“I’m a big fan of cryptocurrencies, but I think it’s important to keep in mind why they’re useful,” Luther said. “A cryptocurrency like Bitcoin enables you to make transactions over large distances for large value amounts, in particular, across borders while protecting your financial privacy to some degree without relying on a trusted third party to intermediate that transaction.”
Should an employer send a cryptocurrency directly to an employee’s digital wallet, the employee needs to account for when the payment was received and what the value of the currency was at that particular time. When the currency is exchanged for dollars, the receiver can calculate their capital gains and pay taxes on them.
This process isn’t fundamentally different than when an employer purchases stock for their employees’ 401(k)s, Luther said. The capital gains from those assets are essentially taxed in the same manner that capital gains from crypto would be.
But generally speaking, cryptocurrencies are especially susceptible to fluctuations in the stock market. Bitcoin’s volatility index fluctuates on average by around 3% every day because, in part, demand varies and its supply is hard-capped by design at 21 million coins.
“There’s a lot of talk about Bitcoin serving as an inflation hedge,” Luther said. “But I think the empirical evidence for that position is mixed at best. So, over the last year, for example, the purchasing power of the dollar has declined more than most people expected, and we’ve had considerable inflation. But the purchasing power of Bitcoin has declined even more.”
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