Miami’s Cryptocurrency—”MiamiCoin” is a Moment, Not a Movement
Last August, Miami became the first city to mint its own cryptocurrency—MiamiCoin—which Mayor Francis Suarez says may one day take the place of taxes. So far, MiamiCoin has made the city nearly $20 million, leading New York City, Philadelphia and Austin to quickly follow suit.
Like BitCoin and other cryptocurrencies, MiamiCoin operates through blockchain technology. When people invest in MiamiCoin, 30% of that investment is given back to the city. The rest is divided up between the investors of MiamiCoin. In the best-case scenario, the price of MiamiCoin rises and the city gets free money. In fact, Miami cashed-out $5.25 million in MiamiCoin just a few weeks ago.
“This has the potential to make taxes unnecessary,” said Mayor Suarez to the Georgetown Law Technology Review. “We’re working to provide every Miamian with a dividend from the city’s yield of MiamiCoin.”
MiamiCoin is just one of Suarez’s powerful initiatives towards rebranding Miami from a vacation destination to a tech hub, a transformation which led The Financial Times to call it “the most important city in America.”
While Suarez’s vision may seem like a utopia, relying on BitCoin poses its problems—and Miami doesn’t seem prepared to deal with them.
First, the value of cryptocurrencies fluctuates wildly. In fact, the value of MiamiCoin has plummeted 95% since its debut. Having a city’s day-to-day operations dependent upon such a volatile income stream is dangerous, but when asked if this would lead him to abandon the initiative in an interview with Fox News, Suarez responded “not at all.”
Second, the anonymity of cryptocurrencies—and lack of universal market regulation and protection—makes them ripe for criminals. Blockchain technology makes it possible to see which accounts own MiamiCoin, but each person’s true identity remains hidden.
When I asked how he planned to combat money laundering, illicit businesses, and tax compliance, Suarez responded that “current findings estimate that only 0.15% of all cryptocurrency transactions across the globe are tied to illicit activity.”
“I do completely acknowledge that this concern exists in the mainstream,” he added. “That’s why I believe in the importance of educating the public on crypto.”
But keeping bad actors off of these platforms is critical, and public education doesn’t adequately address this. According to the Federal Trade Commission, nearly $82 million was reported lost to crypto scams during the fourth quarter of 2020 and the first quarter of 2021, more than 10 times the amount from the same period one year prior.
Third, MiamiCoin faces significant obstacles in accessibility, something which Suarez contended is “one of the most prevalent issues in the adoption of cryptocurrencies.” Because decentralized finance is so disruptive and new—and coming mostly from Silicon Valley—many people write it off as an idea that is intimidating to adopt, or as something they will never be able to comprehend.
Suarez’s solution is that the money earned by MiamiCoin should be spent towards “a more comprehensive educational curriculum.” He continued, “we’re already exploring the expansion of Miami’s charter school network in an effort to deliver [a] more industry-tailored education to technology and finance.”
While education focused on crypto will surely be beneficial for younger generations, it doesn’t solve the issues of functional accessibility in the early stages of crypto’s adoption. Implementing initiatives to make it easier to participate in the crypto ecosystem—like straightforward onboarding, accessible wallets, simple on-and-off payment ramps into other currencies, low transaction fees, and educating adults about programming concepts—is a key factor in bringing blockchain to the masses.
And while Bitcoin was invented as a digital currency, there has been a lot of debate over how to categorize it, which will determine how the industry grows and is regulated. Some argue that cryptocurrencies—which aren’t popularly used as forms of payment—are closer to securities, like stocks and bonds, while advocates argue they’re closer to assets, like commodities.
“To define it as a security would be a mistake,” said Suarez. Doing so would subject crypto to rules on price transparency, greater reporting demands, and market abuse oversight, making it much more expensive and difficult to oversee.
“Lawyers have the opportunity to drive the conversation that would ultimately define crypto as its own category, rather than as a security. We are in a unique position to influence federal regulators on the future of this industry,” he said.
Indeed, lawyers are flocking to Miami to address these issues and join the new wave of tech talent. “Firms in Miami have been and are willing to take on the risks and challenges that come with the crypto industry,” he said. “The [legal] market is growing swiftly.”
A lawyer himself, Suarez has become the frontrunner of what The New York Times called a strange new political breed: the crypto mayor. “Last week, I had the opportunity to lead my first meeting as the new President of the U.S. Conference of Mayors, and witnessing the openness to learning was energizing,” said Suarez.
“It’s no secret that I’ve been actively discussing crypto with other Mayors,” he said. He even took to Twitter to compete with the Mayor of New York City, Eric Adams, about who would take his first paycheck in Bitcoin.
These crypto mayors—and their growing ranks—reflect the increasing mainstream acceptance of digital currencies and ambitious blockchain projects. Embracing these new technologies has become a strong political tool and a surefire way to get publicity.
So their enthusiasm for CityCoins is to be expected. Minting a CityCoins cryptocurrency allows mayors to brand themselves as innovative, crypto-friendly politicians—which in Suarez’s case, helped to attract tech business to Miami—and generate free money for the city without levying taxes.
But in addition to touting CityCoin’s benefits, political leaders should also be upfront about CityCoin’s limits and risks.
“I’ve come to Miami to see the future of America,” Joel Stein, a reporter at the Financial Times, recently wrote.
But that future may be farther off than it seems.
GLTR Assistant Legal News Editor; Georgetown Law, J.D. expected 2023; Vanderbilt University, B.A. 2017. © 2021, Julia Logue.