Race to be US crypto hotspot heats up in Miami and New York
As national governments around the world grapple with the regulation of cryptocurrencies, including crackdowns in China and a possible ban this year in India, at a local level in some U.S. cities mayors are becoming vocal advocates for crypto. They are also vying with each other to attract the digital assets industry to their city for its youthful startup energy and high-paying jobs.
No one embraces this posture more than Miami Mayor Francis Suarez, who won recent reelection to a second term on a platform that included transforming his South Florida city into a global crypto hub.
Over the past year and a half, the 44-year-old Cuban American mayor has become an unabashed cheerleader for cryptocurrency and has sought to attract the industry’s biggest players to his city of just 440,000 in a county of 2.7 million.
“We’re watching an entire industry begin to mature here,” Suarez said in a written interview with Forkast.News. “We’re watching established players in the crypto industry like FTX, eToro and blockchain.com lay anchor here, we’re watching startup activity explode here, and it’s all adding up to a resilient, diversified economy that not only delivers high-quality, high-paying jobs for our residents but also one that can withstand the economic shocks of the future.”
Suarez, a Republican, is the son of former Miami Mayor Xavier Suarez and served as a city commissioner from 2009 to 2017. In November he was reelected by a landslide with more than 78% of the vote in a majority-Hispanic city; 57% of voters identified as Hispanic, according to demographic data obtained from the Miami-Dade County Elections Department.
Some analysts say Suarez was smart to seize the moment when Silicon Valley and deep-pocketed investors were already looking at Florida for tax reasons and its lack of Covid-19 restrictions, according to NBC6 South Florida. In the last year, the 50,000-attendee Bitcoin 2021 conference relocated to Miami from Los Angeles. And the home of the Miami Heat basketball team became FTX Arena following a US$135 million donation to Miami-Dade County.
But detractors question whether a government should be encouraging the savings and use of a cryptocurrency with unclear tax implications and say promises by the emerging tech industry of racial and gender diversity and inclusion are not being met. A nonprofit backed by Melinda French Gates that advocates for gender equity in tech, GET Cities, announced in December that it was coming to Miami to “ensure the tech industry is an engine for — and not against — equity.”
Powerful tweets
One year ago, Suarez saw a tweet by a Silicon Valley VC, Delian Asparouhov, who asked, “ok guys hear me out. what if we move silicon valley to miami” The mayor said he thought it was a chance to be funny when he responded, “How can I help?”
But the tech industry took him seriously and as of Dec. 2021, the city leads in tech job migration with 15.4% year-over-year growth while San Francisco (-34.8%) and New York City (-18.2%) have seen substantial declines, according to data from LinkedIn compiled by Quartz.
On Election Day, Nov. 2, Suarez tweeted that he would take his next mayoral paycheck in Bitcoin, which sparked a twitter competition among mayors throughout the U.S. Eric Adams hadn’t even been sworn in as mayor of New York City when he responded to Suarez he would take his first three mayoral paychecks in Bitcoin.
Suarez’s vision is to “allow every Miamian (and every American) the opportunity to accept their paycheck in Bitcoin,” which can be done through lightning-payment app Strike’s “Pay Me In Bitcoin” feature. Strike converts a percentage of direct-deposit paychecks into Bitcoin, according to its website.
One of the most overt signs of Miami’s crypto enthusiasm was the launch of the cryptocurrency MiamiCoin in August. MiamiCoin is a token with the Miami name and branding, but is operated by an independent organization, CityCoins. Although the city has no control over this Miami-branded currency, Suarez nonetheless welcomed it.
“It’s interesting because it’s not an involuntary tax, it’s not philanthropy, it’s something that is completely different and could revolutionize the way governments are funded in the future,” Suarez said in an interview with Fox Business.
CityCoins describes itself as a token project that helps generate a revenue stream for local governments and brings emerging technology to citizens. According to CityCoins’ website, 70% of rewards are distributed to people who choose to stack MiamiCoin and 30% is sent (in the form of the cryptocurrency STX) to a custodied reserve wallet for the city of Miami. CityCoins works through a protocol named Stacks, an open-source network of decentralized apps and smart contracts built on the Bitcoin blockchain, and Stacks’ token is called STX.
CityCoins holds those rewards as a custodian until the city chooses to convert them into U.S. dollars and takes receipt of them officially. In September, urged by Suarez, the city commissioners of Miami voted to receive its share.
The value that MiamiCoin has generated for the city is over US$22 million as of Jan 6, according to MiamiCoin City Wallet, a Twitter account connected to Stacks. During an August webinar, Suarez said it’s possible that the MiamiCoin initiative “could generate enough money to pay off our entire debt.” In November, he announced in a media interview that the City of Miami will give residents Bitcoin wallets and pay them dividends from MiamiCoin.
Chester Spatt, professor of finance at Tepper School of Business of Carnegie Mellon University, said mayors announcing their interest in crypto is a PR game to attract the younger population and the business community that appeals to them.
“It’s maybe not so surprising either that it’s New York and Miami among others that are in the lead because they’re more anchored to the sort of younger dynamic population,” Spatt said.
“In part because these [blockchain] businesses are growing. And these are businesses that may be more likely to locate or relocate because of their stage as a business,” he added.
Paychecks in Bitcoin
Following Suarez’s footsteps, then-Mayor-elect Eric Adams rolled out his blueprint for turning New York into a crypto-friendly city and welcomed CityCoins by tweet when it announced the launch of NYCCoin on Nov. 10.
“I’ve met with the mayor of Miami and we’re going to have a friendly competition. He has a Miami coin that is doing very well and we’re going to look in the direction to carry that out,” Adams said in a post-election interview with Bloomberg Radio.
The 61-year-old Democratic mayor-elect said in the same interview that he will aim to build a pipeline of diverse young people who understand crypto to fill jobs in the industry, following the trend that millennials have been significantly increasing their participation in cryptocurrency during the pandemic. Adams’ pro-crypto enthusiasm has been a surprise since he did not mention cryptocurrencies or Bitcoin during his campaign.
Adams has not responded to a request for an interview.
More mayors have publicly claimed their admiration of crypto. “While state law prohibits the City of Jackson, TN, from paying me in Bitcoin, I’ll follow the lead of Francis Suarez and Eric Adams and instantly convert my next paycheck to Bitcoin,” Jackson Mayor Scott Conger tweeted on Nov. 4.
“Champa Bay is a leader in everything from sports to tech — why not Bitcoin? Tampa is ready to be the next big hotspot for cryptocurrency,” Tampa Mayor Jane Castor tweeted on Nov. 5, referring to her city by its nickname. Mayor Jayson Stewart of Cool Valley, Missouri announced in September that he planned to give each resident up to US$1,000 in Bitcoin.
Some reservations
Spatt remains cautious toward the idea of converting paychecks into Bitcoin, mainly concerned with taxes that “are denominated in dollars.”
“We’ll see more acceptance of Bitcoin over time. But I don’t expect it’s going to become the medium of exchange,” he said.
In response to reports that Adams would take paychecks in Bitcoin, economist Jason Furman, former chair of the Council of Economic Advisers in the Obama administration tweeted:
“Not only is this a bad economic strategy for NYC and a bad investment decision, it also seems like a conflict of interest. Like a Mayor announcing ‘I’m buying a lot of Amazon stock and then going to put in places policies to benefit Amazon.’”
When contacted, Furman’s assistant said he was unavailable to comment.
Jeffrey Robinson, author of the 2014 book, “BitCon,” in which he concludes Bitcoin is “a classic swindle,” said Bitcoin does not have three essential characteristics of a currency and is instead a commodity without intrinsic value.
“You buy Bitcoin … You put it on the [wallet], you go into Filene’s and you pay Filene’s priced in dollars and the [wallet] deducts the Bitcoin price,” Robinson said. “What you’ve done is put Bitcoin in the middle of a dollar-to-dollar transaction, for a fee, so you’ve added to the cost. What benefit have you gotten doing this? None whatsoever.”
As for MiamiCoin and NYCCoin, Robinson is firm: “If you want to give $10 million you give it to … Children’s Hospital. The city of Miami is not a licensed charity.”
He added, “It’s a scam; the consequences can be that the city of Miami gets stuck with $10 million in worthless money.”
CityCoins didn’t respond to multiple requests for an interview.
In Miami, business and economic leaders report the influx of jobs due to the mayor’s crypto cheerleading is real, however, and the economic impact is being felt. But there also has been some pushback. Women and minorities are not benefiting from the boom, a report by the Miami Herald detailed, a fail for those who tout crypto’s transformative powers to fight income inequality. And with the tech influx, real estate prices and cost of living are rising in the city, in turn exacerbating income inequality.
While Suarez was unavailable for comment on this topic, the Miami Herald quoted a tweet he wrote in December:
“Don’t listen to the haters. If you want to think big, invest in your future, and create a life for your family, bring your talents to Miami!”
What’s next?
Going forward, Suarez said one challenge he faces is how to maintain Miami’s competitive advantage as other cities across the country join the race to capture the crypto industry.
“But we’re doing this the right way, we’re not cutting any corners and we’ve been particularly mindful of developing a full-service ecosystem that meets the needs of local business development, the educational system, and entrepreneurial community — these are stakeholders who will ultimately be the ones fueling the future of our economic success,” Suarez said.
As more cities join the crypto race, Spatt raises legal and regulatory questions, including labor, minimum-wage laws, and requirements related to transacting in dollars. And ultimately, the biggest unknown is what will be the impact of federal regulations.
“The federal government’s views about [crypto] have been kind of a little bit of a mixed bag,” he said.
