Miami's banking on cryptocurrency, New York's in

Miami already has many things going for it, including the sun, beaches, and Cuban coffee. Francis Suarez, the mayor of Miami, wants to make it a global city. He wants to help create a new method to raise money for the city through cryptocurrency.

Miami's banking on cryptocurrency, New York's in

The experiment, MiamiCoin, which he launched in this year's budget, could generate so much revenue that "Miamians would no longer have to pay municipal taxes," he told BBC.

This is just one goal. He hopes to one day be able, as a digital dividend, to give out MiamiCoins to all residents.

MiamiCoin is only one aspect of Mr Suarez’s efforts to make Miami a center for cryptocurrency.

He stated, "I believe that we have been given a unique opportunity to diversify the economy." "Prior the pandemic, over 60% of Miami's economic activity was service-based. This made us especially vulnerable to Covid, and I will not pass up the opportunity to change that.

While Mr Suarez may be the first to the blocks, he is not the only one in the race for crypto capital. Eric Adams, who will be taking over as New York Mayor next month, is hot on his heels.

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What are cryptocurrencies?

Depending on who you ask, cryptocurrencies are either poised to revolutionize the global economy by bypassing national governments' financial control and putting power in ordinary citizens' hands, or they can be risky and unstable tools that allow illegal activities such as ransomware and drug dealing.

A cryptocurrency is a digital product that has been created and "mined" without any support from any central bank or payment systems. It can be created by computers using complex software programs.

Anyone who is willing to put in the effort to build the required computing equipment can mine or create their own cryptocurrency. They can also be sold like a commodity, and they can be mined.

Bitcoin, the most well-known cryptocurrency, has received a lot of attention. However, it has also been volatile and many people have lost their fortunes investing in it. Many other cryptocurrencies have followed its lead.

You can watch the video: What are crypto currencies?

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Adams, a Democrat who will be taking office in January, has pledged to make New York a cryptocurrency-hub. Adams has spoken out about cryptocurrency being paid to city employees and wants cryptocurrency lessons in New York schools.

After hearing that Mr Suarez wanted to receive his first Bitcoin paycheque, the New Yorker asked for the same for his three-months' salary. Both mayors support NYCCoin, their version of cryptocurrency.

In June, Mr Suarez hosted a Bitcoin conference in Miami that attracted around 12,000 enthusiasts including bankers, tech executives and crypto-entrepreneurs. The next one is planned for April 2022.

Another way to show your support for the sector is to embrace the idea of a crypto-token that is city-based, such as MiamiCoin or NYCCoin.

MiamiCoin can be mined by anyone. Mining MiamiCoin is easy and profitable. Rest of the proceeds go to CityCoins, a non-profit initiative that supports city tokens.

CityCoins distributes 70% of the MiamiCoins generated to the City, and 30% to all holders of MiamiCoin.

According to CityCoins, MiamiCoin was launched in August and has since generated more than $20m for the city. Around 3,500 people took part in the mining process.

Important to remember, MiamiCoin is not money, despite its name, warns Dara Tarkowski of Actuate Law in Miami.

It functions more like a security, which needs to be traded and then cashed out at some point.

Ms Tarkowski stated that the token's intrinsic value is solely based on demand and supply. "Tokens have no value until they are cashed out. And just like stocks, we don't know what the future will look like."

Although some of the MiamiCoins have been created, they have not yet been converted into spending money. Mr Suarez however claims that they are in the process of turning some of it into dollars.

He said, "We should expect $5m sometime in December."

Meanwhile, cryptocurrency miners have already raised more than $25m in NYCCoin to New York's digital wallet. There is a split opinion.

There are many other risks associated with cryptocurrencies, aside from their volatility. There has been a long history of cryptocurrency scams and ransomware being used to make money. Regulators are still trying catch up to determine what rules should be imposed on this still emerging investment sector.

John Reed Stark is a cybersecurity consultant who has long experience in academia and at America's top financial regulator, Securities and Exchange Commission (SEC). He believes that the crypto-mayors may be riding for a fall.

He predicted that "Ultimately, whatever they do with cryptocurrency is going to crash-and-burn and be a disaster." He sees cryptocurrencies as an elaborate Ponzi scheme and "the ultimate hustle". This is based on the advocates gaining interest in a series of hyped-up projects.

"They'll soon realize that the emperor doesn't have clothes. He said that a federal or bank regulator would intervene to say, "You cannot do this. You are supporting criminal enterprises. And you are selling products with no intrinsic value."

Mr Reed stated that the SEC is closely monitoring cryptocurrency activities. He believes that accepting cryptocurrency is similar to trading blood diamonds.

Politicians from all political stripes have demanded stricter regulation, starting with Elizabeth Warren, a Democratic senator, and ending with Donald Trump, the Republican former President.

Suarez stated that he recognized the risks but added that his administration had "examined all avenues of due diligence".

Other outsiders praise the mayors for their willingness to invent.

"Lots and lots of municipalities make all kinds of investments in a variety different assets. Ms Tarkowski said that some of these municipalities invest millions in real estate while others in bonds. "To me, this is just another interesting investment tool and frankly quite creative for any municipality to do."

She argued that the view of cryptocurrency as something dark and dangerous is obsolete now that there are so many people investing in it.

Ms Tarkowski stated that city mayors would be foolish not to consider new sources of income if they could supplement their existing funds.

She said, "I would like to applaud Mr Suarez's ingenuity and creativity for trying something new."

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