Local governments look to benefit off Bitcoin boom | Washington Examiner
Washington Examiner

Local governments look to benefit off Bitcoin boom

The cryptocurrency boom has led some local governments eager to cash in on the speculative asset's boom.

While Bitcoin has been around since 2009, the latest Q1 2021 report from cryptocurrency exchange Coinbase posted $1.8 billion in revenue for the year so far, more than it brought for all of 2020.

The mayor of Miami, Francis Suarez, recently spoke publicly about his interest in Bitcoin during several interviews in which he detailed his vision to make it part of the city's economic future, including petitioning for the state of Florida to allow a portion of Miami's treasury funds to invest in Bitcoin.

"I've been a crypto guy since the beginning. I believe in the sort of the underpinnings of it, the mathematics behind it, I'm fascinated by the way that it came about," Suarez told Charlie Shrem, host of the Untold Stories podcast in February.

IS BITCOIN HERE TO STAY? HOW CRYPTOCURRENCY COULD TRANSFORM OVER NEXT DECADE

Miami City Hall commissioners voted in February at the request of Suarez to commence studies on the use of cryptocurrency for city services. If a contract were to be approved, employees would have the option to receive all or part of their salaries in Bitcoin and the public would be granted the option to pay for city services using the cryptocurrency.

The vote came just days after Tesla CEO and SpaceX founder Elon Musk announced his electric vehicle company had purchased $1.5 billion in Bitcoin and slated plans to accept the electronic currency for consumer vehicle payments, causing a significant surge in Bitcoin value.

Jeff Roth, a government planning expert and author of Fires, Floods, and Taxicabs: Taking a Bite Out of Big Apple Bureaucracy, has been involved in New York City government for 14 years and has participated in several innovative technology projects. Roth told the Washington Examiner he thinks Suarez's enthusiasm over cryptocurrency is "going to attract people to come into Miami to invest in this space, and I think that means jobs."

According to Suarez, he believes "income inequality is the challenge of our generation," adding that he believes technology is the economy of "today and tomorrow" and that inviting more tech industries into Miami will create higher-paying jobs.

"For me, it's innovation, it's public-private partnerships, it's innovators that are going to make the difference, and create equity and try to solve the social problems that we have, not the government," Suarez said.

Ohio attempted to integrate some cryptocurrency assets into the state's treasury in 2018 but failed after the state's attorney general deemed the program illegal in 2019. However, in Nevada, Democratic Gov. Steve Sisolak has said he plans to introduce legislation to allow large companies in industries such as blockchain, artificial intelligence, and renewable resources to form local governments with the same privileges and responsibilities as counties in the state.

Jeffrey Berns, CEO of Nevada-based Blockchains, wants his company to break ground by 2022 in Nevada's Storey County to build 15,000 homes and 33 million square feet of commercial, industrial space within 75 years, according to the Associated Press.

Part of Suarez's initiative to bridge his city's economy with Bitcoin is to make Miami a "clean energy" mining hub.

Cryptocurrencies are generated by completing "blocks" of verified transactions that are added to the blockchain, which is a simple explanation for a complex computing process called mining. Bitcoin miners expend power and energy to complete blocks and, therefore, can earn cryptocurrency in the process. Investors in cryptocurrency often pay so-called "gas fees" when purchasing assets due to the energy required to complete a transaction. A single Bitcoin transaction costs roughly 707.6 kilowatt-hours of electrical energy, which is the equivalent to the power consumed by the average U.S. house over 24 days, Forbes reported.

Suarez told cryptocurrency writer Laura Shin that Bitcoin mining's problem is its reputation as a "dirty activity” because "90% of it is done in countries that have dirty energy." The Miami mayor believes the city's nuclear power capability, coupled with solar and hydrogen-powered technology, could allow for mining using “a clean energy supply that’s essentially unlimited."

According to Coindesk.com, 65% of cryptocurrency mining's hash rate, which refers to the computing power dedicated to mine blocks and secure the network, is happening in China.

Stephen Mathai-Davis, co-founder and CEO/CIO of Q.ai, a Forbes company using artificial intelligence to generate investment recommendations, told the Washington Examiner: "From a ... government security perspective, it'd be the best interests of the U.S. to have mining here in the [country]."

Suarez has voiced unease about 90% of cryptocurrency mining taking place outside of the United States, also citing national security concerns.

Both Roth and Mathai-Davis told the Washington Examiner they view the potential environmental impact and heightened energy costs surrounding Bitcoin mining as an elevated risk factor in the asset's valuation optics, though Mathai-Davis added, "I would argue its significant [impact] is probably going to be proven to be overblown for the next five or 10 years as we get more efficient computers."

According to Roth, as the blockchain network grows to support more Bitcoin and other forms of cryptocurrency transactions, so, too, will the computational factor rise to manage more asset transactions over time.

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

"So while the network might grow in the computational needs might grow ... I would expect the people investing in the space would find ways to create more efficiency in the system," Roth said.