The author is a collaborating editor of FT
Earlier this month, Francis Suarez, mayor of Miami, announced that he take your next paycheck in bitcoin. New York’s new mayor replied that he would take his next three. This kind of good-natured buffoonery is the norm for American mayors.
And it’s not a bad idea to convert your salary into a appreciating asset, or at least convert it as soon as you can. When I’m done writing, for example, I consider asking my editor to pay me in real estate.
What Suarez and Adams are actually doing is announcing their good faith to crypto developers and investors. This week, crypto.com, a trading platform, agreed to pay $ 700 million for the naming rights to the arena where the Los Angeles Lakers play basketball. It could mark the top of a bubble or the start of the next industrial revolution, but any mayor would be foolish not to invite into a potential tax base while we all wait and see what happens next.
Behind Suarez’s announcement, however, also lurks a set of smarter actions designed to further anchor cryptocurrencies into Miami’s balance sheet. These include an alliance with the creators of a cryptocurrency called MiamiCoin. There is a long history of city-states producing their own money. But in the past, this production came with monetary sovereignty – the ability to control quality and volume. Miami launches an unprecedented experience: it lends its name to money it does not control.
A financial center is not just a place with a lot of capital. Finance is a set of tools. If you want them to work at all, you have to put a lot of people in one place who know how to use them. Fernand Braudel, who has written extensive economic histories of medieval Europe, described financial skills as a “legacy”, slowly accumulated through daily business practice.
In the 13th century, Leonardo Fibonacci brought the Arabic numerals and the abacus to Pisa. By the end of this century, merchants in northern Italy – probably in Florence – had developed double-entry bookkeeping. It spread in part through the publication in 1494 of Arithmetic sum, a text by Luca Pacioli, a Venetian. The city-states of Italy did not invent credit money. But they made it more efficient – easier to use and easier to create. This increase in efficiency did not happen by accident, however. Historian Peter Spufford recorded how lay teachers appeared in Florence and Venice to encourage literacy and numeracy. The city of Lucca has hired a abbachist, a professor of business accounting, specifically to help the city’s business houses.
In Miami, Suarez signage is basic economic development. If you think crypto is the future of finance, you want to make sure you invite Fibonaccis and Paciolis to your city. Miami is considering allowing city employees to collect their wages in bitcoin and Suarez has said he would like him to be able to collect taxes in bitcoin as well. All of this remains an economic development plan – trying to encourage the use of crypto, in hopes of attracting more crypto abbasistas.
The city also had the beginnings of its own monetary policy, although Renaissance Italy offered less of a model. In August, miners started producing MiamiCoin, currently trade like MIA. Minors are in no way linked to the city. MIA is sitting on Battery, a blockchain or an electronic register of transactions. Stacks uses bitcoin as a settlement and reserve asset, in the same way that commercial banks use reserves held at the US Fed. MIA-producing miners have offered the city of Miami a 30 percent share of their profits.
In September, Miami city commissioners voted to accept the share, valued last week at $ 21 million. It is a kind of seigniorage, the profit of the manufacture of money. The city gets a monetary profit, but no monetary control. It’s a start.
Bitcoin proponents like to point out that Italian city-states produced high-value gold guilders and ducats – hard money, just like bitcoin. This is only partly true. Gold was intended for long-distance trade, but Venice and Florence also maintained a supply of silver coins for small transactions in the home. Overtime, they made these rooms smaller, to keep prices stable while their own economies grew. Italian merchant towns were not hard money fetishists. They retained their own monetary sovereignty, carefully lowering the value of their own national currencies over time because they were growth fetishists.
Cryptocurrency is, at its core, a gamble that the production of money should be a purely private affair. The challenge with this idea is that, historically, different groups of people need different things from monetary policy. Hard money and tight credit are good for some people. Soft money and bulk credit are good for others. When countries – and cities – claim monetary sovereignty, they mediate between different interests. It is the basic work of any state.
If MiamiCoin grows and coin-denominated contracts become a part of daily city life, the city of Miami will eventually have to decide whether to claim not only a share of MIA’s profits, but some measure of control, too. .