Recently, the City of Philadelphia became the latest local government to jump on the blockchain bandwagon, joining several other cities in offering a new city-branded cryptocurrency.
The logic of this decision seems to be that it offers a way for people in or from Philadelphia to mine the new city-branded coins, with 30% of the value generated being dedicated to the city coffers. It has the additional theoretical benefit of signaling to crypto and blockchain entrepreneurs that Philadelphia is a “friendly” environment for their business concerns — whatever that means.
A new revenue source to fund city initiatives, and a fresh coat of polish for local business development efforts. What’s not to like?
It turns out, a lot actually.
Full disclaimer — I’m not an expert in cryptocurrency, but you don’t have to take my word that there are serious problems with the idea of a city-branded cryptocurrency. I can say that as an approach to municipal finance, it probably leaves an awful lot to be desired. (I can’t imagine a program like this coming up in any serious way in discussions between — for example — city officials and any one of the bond rating agencies that weigh in on municipal debt issuance. The city would likely get laughed out of the room.)
City-branded coins are likely just a gimmick. An empty gesture meant to (hopefully) convey some level of technology relevance to the business community, and enable elected officials to pay lip service to “exporting the tax burden.”
Pure nonsense.
But the adoption of a city-branded cryptocurrency in Philadelphia specifically raises several serious problems that are worth considering when we talk about these kinds of programs.
First, the appeal of a city-branded cryptocurrency isn’t just that it can generate money for the city. It’s also that you — yes, you! — could get rich. Investors aren’t wild about crypto because of its stable, predictable, longterm returns. The idea that people can mine their own…
