The What of the What What?
On January 25th the New York Times posted a story entitled The Rise of the Crypto Mayors speaking into existence my worst nightmare. The piece featured Mayor Scott Conger of Jackson, TN, Mayor Francis Suarez of Miami, FL, Mayor Eric Adams of New York City, NY, Mayor Hillary Schieve of Reno, NV, and Mayor Chris Swanson of Two Harbors, MN. The Rise of outlines a wide variety of mayoral interests with crypto-investments from wanting to be paid in Bitcoin (Conger wants to, Adams is) to wanting to invest public funds into cryptocurrencies (Conger and Swanson want to, Suarez is) to being a crypto-enthusiasts (all of the above). Given that two of the mayors mentioned (Suarez and Schieve) serve as the President and Second Vice President of the U.S. Conference of Mayors and crypto-enthusiasts are mass-emailing mayors about investment opportunities it does seem to the extent these investments are legally and politically viable that more mayors will follow suit.
The most disturbing part of the piece for me was a quote from the Mayor of Miami about an exchange he had with the chairman of the SEC that could have been straight out of The Big Short:
Last month, Mr. Suarez had a private Zoom call with Gary Gensler, chairman of the Securities and Exchange Commission, who has called for increased scrutiny of crypto.
“It was kind of funny,” Mr. Suarez said. “He said, ‘I think I should have done a little bit more homework.’ It was his own way of saying that I really knew what I was talking about.” (The S.E.C. declined to comment.)
The Miseducation of Several Mayors
Throughout The Rise of, the general refrain from government officials on why they are bullish on crypto-currencies is because (1) It promises financial return for their city, and (2) It has broad bipartisan constituent appeal, and (2) Free money. Who doesn’t vote for free money? These are the priorities of every mayor constantly and both speak to a general misunderstanding of the risks at play.
Since The Rise of was published, Mayor Eric Adams of New York City, NY received his paycheck in Bitcoin, which because of Bitcoin’s volatility was 16% less than what he would have “banked” if he simply received the paycheck in U.S. dollars and Mayor Scott Conger of Jackson, TN, received a letter from Tennessee Treasury Comptroller Jason Mumpower warning him that if he paid employees in cryptocurrency that “such direct payments could violate the Fair Labor Standards Act and other state wage laws.” While the financial risks Mayor Eric Adams and other opt-in employees take on individually are theirs alone to bear, what happens when public investments fail to return “bitcoin yields”? One need not look far to observe the experiment realized. Recently, after El Salvador invested heavily in Bitcoin and declared it legal tender, they found themself effectively bankrupt and at risk for the economy collapsing.
Skirting Regulations and Democracy
More concerning than not making prudent financial investments, some mayors have more or less said their attraction to crypto-currencies is precisely to avoid the bureaucracy of public financing and have spoken flippantly about traditional means of collective governance such as taxes and voting. Last Friday, protestors from the New York Boricua Resistance and Colectiva Solidaridad gathered in front of City Hall to protest “The Tax Incentive Code 60” which provides tax exemptions to businesses and investors that relocate to and/or establish themselves in Puerto Rico, which would directly benefit Brock Pierce, a cryptocurrency expert, and friend of the Mayor. In The Rise of, Mayor Hillary Schieve of Reno, NV said she “was not a big fan of banks,” and Mayor Chris Swanson, of Two Harbors, MN, described creating a decentralized autonomous organization (DAO) to pool money for public projects in exchange for some kind of voting power over the projects because it would be quicker. Mayor Francis Suarez told Yahoo! Finance that the [MiamiCoin] approach could potentially eliminate the need for Miami residents to pay taxes, which would be “revolutionary.”
Privatization of Public Goods
The sentiments expressed in The Rise of the Crypto Mayors align with similar themes of cash-strapped cities (perhaps because their budget is over-extended to the police), investing heavily in procuring and attracting private technology corporations because of their promise to provide jobs, “free” services, and buzzword-laden solutionism, which I and many others have observed the risks of in the “smart city” space. Government leaders hold a fiduciary duty to protect residents’ long-term interests and while it is possible crypto-currency may provide financial returns to lucky investors those returns are not guaranteed. Further, incorporating and relying on their technology in public financial services (and others) may create risks for the long-term sustainability of those services through vendor lock-in or vendor (Read: market) failure.
Tracking Crypto Mayors
Now that the U.S. Conference of Mayors and the New York Times are all in on “Crypto Mayors,” I guess I am too. @Crypto_mayors, an apparent NFT collection of “mayors that crypto” appeared on Twitter recently, which might be a good way to see when new Crypto Mayors as they drop.
Below is a running list of crypto interests and the mayors who are interested in them alongside a few of honorable mentions.
Mayor Francis Suarez of Miami, FL (MiamiCoin)
Mayor Eric Adams of New York City, NY (NYCCoin)
Honorable Mention: President Nayib Bukele of El Salvador adopted Bitcoin as legal tender.
Payments via Cryptocurrency:
Mayor Scott Conger of Jackson, TN
Mayor Francis Suarez of Miami, FL
Mayor Eric Adams of New York City, NY
Mayor Jayson Stewart, Cool Valley, MO
Mayor Jane Castor, Tampa, FL
Honorable Mention: Brussels member of Parliament (MP) Christophe De Beukelaer, became the first European politician to convert his salary into Bitcoin and explained his motivation came from New York City’s Mayor Eric Adams decision to adopt Bitcoin payment.
Public Fund Investment into Cryptocurrency:
Mayor Scott Conger of Jackson, TN
Mayor Francis Suarez of Miami, FL (did the port muni-bonds go to MiamiCoin?)
Mayor Eduardo Paes of Rio De Janeiro, Brazil declared that 1% of treasury reserves would be poured into cryptocurrencies.
Mayor Chris Swanson of Two Harbors, MN
Honorable Mention: Governor of Texas Mayor Abbott is interested in attracting Bitcoin miners to Texas so *he doesn’t* have to use public funds to invest in the electric grid.
Honorable Mention: Although China promoted 15 blockchain pilots in Beijing and Shanghai last week, it has banned Bitcoin.
Who/what am I missing?