Miami receives $5.25 million from MiamiCoin. Mayor has ideas about how to spend it.
The city of Miami on Wednesday received a wire transfer of $5.25 million from MiamiCoin, the first donation from a cryptocurrency project designed to raise money for municipalities.
Mayor Francis Suarez confirmed the wire transfer to the Miami Herald during an interview Wednesday.
“It’s obviously great for our city,” Suarez said. He later tweeted about the gift, calling it a “historic moment for our city to collaborate with an innovative project that creates resources for our city through innovation not taxation.”
The city received a total of $5,250,251.19 in U.S. dollars, according to an email sent to the mayor by the city’s finance department.
The city government cannot hold cryptocurrency under current state and federal law, so the creators of the initiative that started MiamiCoin — Citycoin — converted a percentage of the income generated from MiamiCoin activity into dollars to make a donation to the city. Under an agreement approved by commissioners in July, the city can receive the cash as a gift deposited into an account that won’t be spent until commissioners decide how to use the money.
Miami’s finance director, Erica Paschal, told the Herald in November that there are no restrictions on how the money can be spent.
At a January press conference to announce new funding for several organizations working to serve people experiencing homelessness in Miami, Suarez alluded to using MiamiCoin money to build affordable housing. On Wednesday, the mayor said he needs to discuss his ideas for spending the MiamiCoin money with commissioners before formalizing a proposal that would later need commission approval.
Suarez has said that he wants to distribute proceeds from MiamiCoin as crypto “dividends” to taxpayers, and he’s suggested that if successful over time, MiamiCoin could fund city services and eliminate the need for taxes altogether.
The organizers of the CityCoins initiative have said they want to raise funds for municipalities by generating demand for city-specific digital tokens. Miners of MiamiCoin are eligible to receive rewards, and a portion of the rewards are set aside for the city. Thirty percent of mining rewards are sent in a cryptocurrency called STX to a digital wallet reserved for the city. According to the CityCoins website, the city can claim this and convert its STX to dollars whenever city officials want.
MiamiCoin opened digital mining Aug. 3, and it has not been immune to the recent volatility of cryptocurrencies.
Individual cryptocurrencies now largely move in tandem. So when the price of Bitcoin fell in January, so did the price of MiamiCoin, which itself is a function of the price of a Stacks coin.
As a result, the city’s MiamiCoin wallet declined significantly in value. On Jan. 18, the city’s MiamiCoin wallet stood at approximately $29 million. By Jan. 24, the amount had fallen to approximately $13 million.
Suarez and Michael Sarasti, the city’s chief innovation officer, said part of the decrease in city wallet’s value over time is due to the nature of CityCoins’ conversion to dollars, which occurred over the course of November. The mayor has generally defended cryptocurrency’s volatility by arguing that Bitcoin, for example, may fluctuate in value but remains far more valuable than the U.S. dollar.
“It’s still tens of thousands of times more valuable than what is considered the most valuable fiat system,” Suarez said.
In the case of MiamiCoin, the token debuted in August at a value of about four-tenths of a cent. It quickly shot up in value before coming back down, with the most recent decline leaving it worth about seven tenths of a cent, which is 63% more valuable than its initial value. The price is is down about 88% from its highest value of about 5 cents.
This story was originally published February 2, 2022 at 8:18 PM with the headline "Miami receives $5.25 million from MiamiCoin. Mayor has ideas about how to spend it.."
