Bestinau got that-
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What do Ben Simmons and a municipal cryptocurrency have in common? Neither of them could make it in Philadelphia.
A few months after news broke that the city was investigating the adoption of CityCoins, a philanthropic cryptocurrency that local governments can use to fund citywide initiatives, Chief Information Officer Mark Wheeler told Technical.ly that Philadelphia is no longer pursuing the idea.
The decision came down to the novelty of CityCoins, he said, with the lack of use cases and crypto’s volatility making it difficult for officials to envision how Philly could use the funding, let alone managing it.
“The city’s standard practice is to limit fundraising to a specific policy objective,” OIT spokesman Labonno Islam explained to Billy Penn. “CityCoins presents an ongoing fundraising model that does not align with established standard practice.”
How the coin should work: After a mayor publicly accepts a crypto digital wallet and the competitive mining process begins, 30% of the revenue generated by the coins will go into a fund that the city can cash out at any time. As for the other 70%, this one goes to people who own the coin — including everyone, not just Philly residents.
Crypto Mayors Are Popping Up in US Cities In November, Tampa Mayor Jane Castor expressed interest in receiving paychecks in Bitcoin, while NYC’s Eric Adams converts his earnings into crypto as the city explores a partnership with CityCoins. And in Miami, Mayor Francis Suarez accepted more than $5 million dollars from CityCoins before MiamiCoin’s value fell to less than four-tenths of a cent.
President Joe Biden recently signed an executive order giving the green light to cryptocurrency regulations, but municipal governments cannot hold their own cryptocurrency.
This red tape creates a de facto intermediary. CityCoins is supposed to oversee Philadelphia’s crypto wallet and convert the funds into dollars before donating it to the city’s treasury.
And CityCoins is an unauthorized cryptocurrency, meaning it would be virtually impossible for officials to keep track of who owns a PhillyCoin — or who may be using the currency for illegal transactions.
“City governments need to be aware of who may be committing fraudulent transactions. They cannot be associated with any unauthorized behavior,” said Mike McCoy, a local technologist at blockchain startup Blockdaemon and friend of Wheeler.
McCoy said it would make sense for Philly officials to explore other, authorized entities† which can add an extra layer of security by requiring users to identify themselves with certificates, giving administrators control over who can do what with a coin.
A few of these already exist to help nonprofits raise money, McCoy noted. EnDAOment and The Giving Block allow users to donate cryptocurrency directly to a charity or charity of their choice, with no profit sharing.
CityCoin’s public relations liaison Logan Storrer maintained that the CityCoin community supports Wheeler’s decision to halt the vetting process.
“We don’t blame anyone in the city of Philadelphia for waiting for the big picture to be seen more clearly,” Storrer wrote of Discord. He said PhillyCoin would be treated in exactly the same way as MiamiCoins, where “the city has the option to withdraw money from their wallet at any time” even if they cannot directly own the wallet.
In January and February, CityCoin community members communicated closely with Wheeler as he shared some potential use cases included in his pitch to Mayor Kenney. But once the vetting process started, he stopped asking for input.
One of the biggest questions the cryptocurrency raises: who should determine where the CityCoins funding goes: residents, PhillyCoin stakeholders, or city officials?
“What are the things that local currencies claim they can help solve?” said urban technology researcher (and member of Eric Adams’s transition team) Mike Bloomberg in February. “CityCoins does not start from that question. They start by building a coin and telling cities to find out what it can solve.”
In Miami, the first donation will fund a rent assistance program. Mayor Suarez also noted that the program could help build financial literacy initiatives or move taxes.
In Philly, Wheeler proposed through Discord to use PhillyCoins to enhance the PHLConnectED broadband Internet initiative or to fund digital literacy programs established through a partnership with the Digital Literacy Alliance and the Office of Innovation and Technology.
Storrer, CityCoins’ PR liaison, said community members are currently building components that better demonstrate how governments can handle the currency.
There is another problem that needs to be addressed first: runaway inflation.
The existing model for CityCoins “presents an annual inflation rate of more than 20% for the first four years, [resulting] in an extremely small amount of revenue for the city later in the coin’s life cycle,” Storrer posted to Discord.
What does this mean? Cities can expect large payouts from CityCoins initially, but over time, the currency probably won’t be able to offer the same level of funding. Storrer later informed Billy Penn via Discord that CityCoins is discussing changes that would reduce the number of CityCoins in immediate circulation, which could gradually increase the potential funds available to local governments.
With this in mind, enthusiasts are debating whether to change the schedule, which should gradually reduce the number of CityCoins in circulation to avoid excessive inflation. Storrer said these changes aim”[preserve] value to the city over the lifetime of the city’s mint,” which have nothing to do with Philadelphia’s concerns over financial and legal issues.
Still, CityCoins is confident that growing concerns about inflation, transparency, and actual utility will not affect the interest of other cities still investigating it, such as New York and Austin.
“Since Philadelphia announced its decision, key figures in the New York City and Austin governments have continued to express interest in CityCoins,” Storrer said.
Austin’s lawmakers just passed a few resolutions requiring the city to use blockchain technology for certain operations and encouraging the state government to explore how crypto could be used elsewhere. Meanwhile, CityCoins’ Discord server targeted an op-ed published in the Austin Chronicle that compared crypto to a multi-level marketing plan, sparking many outraged rebuttals and a hopeful op-ed.
“CityCoiners want to defend themselves in Discord, but not in other public forums,” noted McCoy, the technologist at Blockdaemon.
Against this backdrop, McCoy and NYC technical advisor Bloomberg think CityCoins would need to make major improvements to operate within Philadelphia and other cities with significant wealth gaps — which they deem unlikely.
“I don’t think CityCoin would make the changes to become a permitted state,” McCoy said. “It’s a crypto community that lives online, so Philadelphia doesn’t need them. They can just find another city that will accept it.”