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Public institutions of all kinds, including government treasuries, are steadily warming to bitcoin and cryptocurrency. The volatile new asset class presents an opportunity for governments, which are often underfunded, to reap massive rewards. The risks are self-evident, although some in the crypto industry might say it’s riskier for governments not to get involved.
Earlier this month, Rio de Janeiro, one of Brazil’s largest cities, announced its intentions to allocate 1% of its municipal treasury to crypto. It will also give a discount to those taxpayers who pay their dues in bitcoin and rework its tax code to attract foreign, crypto-rich, individuals and companies.
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“It makes a lot of sense for the city of Rio de Janeiro to become a tech hub, and also work with blockchain technologies,” Municipal Secretary for Economic Development Chicão Bulhões told CoinDesk TV’s “First Mover” on Thursday.
Bulhões also noted that the city’s burgeoning blockchain industry, which includes stablecoin issuer Transfero and crypto fund Hashdex, is perhaps one of the largest in Latin America.
“It's the future that is already here. So we want to be a part of it,” he said.
You might think Copacabana and Ipanema beaches would be enough of a draw, but several cities and governments are following a similar playbook to Rio’s to compete for this wave of capital.
Miami Mayor Francis Suarez, who attended the “innovation week” where Rio announced its plans, was a first mover. He recently took a paycheck in bitcoin, floated tax breaks, promised Miami would buy bitcoin and set up a “MiamiCoin,” where anyone can mine on the Stacks blockchain to reap rewards for both Miami’s semiofficial wallet and themselves.
There are others, too. New York City Mayor Eric Adams wants to become “mayor of all the bitcoins.” Scott Conger, the mayor of Jackson, Tenn., is trying to find a way to mine bitcoin in a disused wing of city hall. Mark Wheeler, chief information officer of Philadelphia, is extending the city’s namesake brotherly love to the coins.
Reshma Patel recently ran a campaign to become the next comptroller of New York City with a thought-out blockchain plan that included investing the city’s pension fund in “major cryptocurrencies.”
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“Bitcoin has a set, finite supply, which gives investors a hedge against inflation – which could be on the rise if further stimulus actions are needed. Fears of inflation today, and through the future, are valid, and that is why some of the world’s most forward-thinking companies, like Tesla and Square, have invested a portion of their total cash reserve in bitcoin,” Patel wrote in a draft policy proposal.