In attempts to establish more financial independence from the Trump administration, Berkeley, California is in the preliminary stages of launching its own cryptocurrency.
The coins would be backed by municipal bonds — a security that local governments issue in order to pay for public projects — and distributed using blockchain (the technology that underpins cryptocurrencies). Considering that cryptocurrencies are known for large price fluctuations, officials hope that this use of bonds will discourage the speculation that often leads to sudden spikes and dips.
According to Business Insider, the city could become the first in the nation to hold an initial coin offering (ICO), the process through which cryptocurrency tokens are distributed in exchange for investments. By attracting investors through an ICO, the city hopes to raise funds to assist in efforts combatting homelessness and its affordable housing shortage. There’s also a chance residents could use these coins for goods and services in the city, although that is presently a bit of a challenge — businesses like Steam and Stripe have been unable to secure the use of cryptocurrencies for payments in the past.
Generally speaking, ICOs are facing some apprehension from authorities and regulators. The largely unregulated sector has, in some cases, permitted scammers to take advantage of amateur investors with Ponzi schemes, unrealistic promises, and other types of fraud. However, as noted, Berkeley officials seem to hope the institutional backing of municipal bonds will bestow their ICO with legitimacy.
City councilmember Ben Bartlett, who has been leading the ICO effort, characterizes the project as a form of resistance: “The Trump administration has devoted untold resources and energy to divide us and tear us apart using race, gender, fear, jingoism, xenophobia, and capital,” he told Slate Magazine. “In order to resist we’re going to have to finance it ourselves.”
Berkeley has struggled with many Trump administration policies, especially the new tax bill, which removes incentives for businesses to build more affordable housing in the area. As Business Insider notes, current estimates suggest that the tax code may diminish the future supply of affordable housing by almost 235,000 homes in the next decade.
Bartlett describes a three-part committee that is currently drawing up the blueprints for the ICO. The city government, represented by Bartlett and Mayor Jesse Arreguin, is providing policy guidance. Neighborly, an online municipal bond platform, is assisting with infrastructure and underwriting. And the UC Berkeley Blockchain Lab is conceptualizing the technology.
Though the plan is still in its preliminary stages, and the committee won’t release the full details of the project until this Spring, Bartlett seems optimistic about the success of this unprecedented endeavor: “We innovated recycling and solar here [in California]. We pride ourselves on our frontier mentality,” he said.
