Bitcoin, Ethereum and the more than 10,000 other cryptocurrencies in existence have made some lucky investors very wealthy. Now, some American cities, including Philly, are considering minting their own branded electronic currencies as a way to help cover municipal expenses.
Mayor Jim Kenney has given his staff the go-ahead to start exploring a partnership with CityCoins, a non-profit which creates cryptocurrencies that local governments can use to generate revenue. New York City and Miami are already have their own currencies with the firm.
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For CityCoins, the process begins with crypto enthusiasts voting on which municipalities they'd like to see represented. If a city is selected, the mayor must endorse the project publicly and formally accept the digital wallet the coins would be sent to.
Then the minting process begins. Miners, who don't have to be city residents, run "smart contract" software on their personal computers to mint new coins for the company. They're then entered into a lottery for the chance to win some of the coins. Thirty percent of what's minted goes to the city's wallet and the rest is distributed back to the miners by CityCoins.
Miami's Mayor Francis Suarez said the program will generate $60 million in revenue this year for his city, which just withdrew the first $5 million from its wallet, which the mayor hopes to use on a rental assistance program.
Suarez believes that CityCoins could eliminate the need for taxes altogether. But not everybody has such high hopes for municipal cryptocurrency projects.
Mark Headd, who was the Philadelphia's first ever chief information officer, estimated in an op-ed that a quarter of the city won't be able to participate since they don't have access to a working computer.
There are also accountability issues. Since CityCoins is a decentralized grassroots effort, as most crypto operations are, it's unclear who would actually be sending the money to cities or who would be responsible if a municipality has trouble accessing the funds.
It's also not yet clear how the currency would need to be accounted for when it comes to city budgets and taxes.
Additionally, it's impossible to identify individual CityCoins backers unless they disclose themselves, which means the city could unwittingly take money from a criminal or some sort of unsavory organization.
These are among the reasons Suarez said Miami will wait at least six months to spend its $5 million in crypto earnings.
Headd added that cryptocurrencies are inherently volatile, which is why he says is why they're so popular and lucrative for investors but a bad idea for municipal finance departments, which in his mind should be focused on stability.
But the city's current CIO Mark Wheeler is excited about the project, although he did note that the city is simply considering it at this point and that nothing is set in stone.
He added that the program is more oriented toward well-resourced and experienced crypto enthusiasts than everyday Philadelphians.
“It favors people with deep pockets,” Colin Leech, an editor at a crypto news website called CoinDesk, told Billy Penn.
Participants must buy STX coins, a different type of cryptocurrency, to participate. And no matter how much STX coin they spend, there's no guarantee they'll get any money back through the CityCoins lottery, which makes it a risky proposition.
But Wheeler said that the funds Philadelphia potentially stands to gain from the project would help everyday city residents.
Digital literacy and housing programs in the city could get funding through CityCoins, which could be used like a grant or philanthropic donation, he said.
Still, Wheeler said there's no clear timeline for implementing CityCoins in Philly and that the city government is not expecting any revenue from the program to arrive soon.
He also said this is not a call for city residents to start buying crypto.
“We’re recognizing there’s changes in the landscape, technically and socially, that crypto is gaining some greater adoption, and it’s just time for us to start thinking about what that means,” Wheeler told Technical.ly. “It’s a green light to say, these are conversations our city should start having.”