New York Mayor Eric Adams smiles in this video, which was released in late January on Twitter. Logic: it’s his first payday at City Hall. But the moment is special for another reason. By taking a pledge from his Miami counterpart, Francis Suarez, and using the Coinbase platform, his check for just under $ 10,000 was instantly converted into bitcoins and ethers, the two most popular cryptocurrencies most valued in the world.
This shallot between two mayors of megacities is one of the many examples of the new battle over these digital tokens. “Until 2021, very few politicians would dare to say ‘bitcoin is good’ with a touch of irony Alexandre Stachchenko, Director Blockchain & Cryptos at KPMG France. But the total cryptocurrency market now represents almost $ 2 trillion in valuation, including more than 800 USD alone for bitcoin.
A sufficient argument for Suarez and Adams to try to welcome players into this thriving open-arms ecosystem. They are not the only ones. Every week or so, a large metropolis enters the dance, with great fanfare. In mid-January, in Brazil, Rio de Janeiro Mayor Eduardo Paes announced that he would invest 1% of the Treasury in bitcoins and the launch of “Crypto Rio”, a local cryptocurrency. Despite a very sharp fall in prices at the end of January, this appetite is not being quenched. Crypto is already fueling the huge NFT market ($ 44 billion in 2021), and tomorrow will be the core of the meta-verse and Web 3.0. “The environment will continue to grow for at least the next twenty years,” predicts Alexander Stachchenko.
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Who has the best weapons?
In this match, it’s hard not to mention El Salvador. The very connected President Nayib Bukele took a risky bet by being the first to make bitcoin legal tender. A strategy strongly disliked by the International Monetary Fund (IMF), which is concerned about the impact of bitcoin volatility on the Salvadoran economy. However, in a country where a significant portion of the population does not have a bank account and receives Western Union transfers, bitcoin also has benefits (reduced cost and speed of exchanges). Since then, Bukele has multiplied invitations to the sector and announced the creation of a Bitcoin City and the exemption from income and property taxes for its future residents. “Basically, there is no risk for him: his policy is to create jobs, prosperity and VAT,” says Sébastien Gouspillou, head of the company BigBlock Datacenter, to whom we have proposed transferring its French activities there.
The Salvadoran president is betting that his strategy will provide energy to his country, which is relatively poor and dependent on the dollar. The calculation is the same in Puerto Rico. The American island, hard hit by the financial crisis and Hurricane Maria, is looking for a new life. The argument is substantiated. “Our banks are regulated by the federal government in US dollars, but our tax system is a Caribbean tax haven, thanks to Act 22, unique in the United States, which exempts residents from capital gains, interest and dividends.” said Juan Carlos Pedreira, one of the spokesmen for the Blockchain Trade Association. And it works. According to local “Crypto Rico” authorities, the number of requests for tax breaks from new residents hit record highs in 2021.
In the rest of the world, especially where tax benefits are less, the focus is on political will. A weapon that should not be underestimated. The industry must indeed withstand fluctuating prices, but also the growing hostility in certain countries. In the spring of 2021, China caused an earthquake in the sector by stopping the mining of bitcoins on the country’s land, as it was home to more than half of the world’s activity. In this uncertain landscape, crypto companies are more eager than ever to find a stable and secure environment.
“How can I help?”
It is on this string that many American cities of second rank, which would see themselves at the top of the bill, play. Like Austin (Texas), which in 2022 will host one of the most important crypto events of the year, CoinDesk’s “Consensus”. But also Cheyenne, Wyoming, a state prior to the legalization of decentralized autonomous organizations, also called DAOs. And of course Miami, where its mayor has become a real CEO to personally support all companies that want to establish themselves in their territory. His slogan, “How can I help?”has become a website and is available in giveaways. These efforts bear their first results. The most important city in Florida attracts big fish, like the star investor, or the US headquarters of Blockchain.com, which has invested “Magic City” … in leaving New York.
For a last category of cities or small nations, it is finally a matter of preserving its rank, its society, its wealth. Switzerland, known in the banking sector and asset management, understood this very quickly. Its canton of Zug, which has the lowest corporate tax rate in the country, positioned itself in 2015 as the new “crypto-valley” and now hosts nearly a thousand companies or blockchain-related funds.
Still, it seems that Adams, in the big apple, is walking on eggshells. “It is extremely unlikely that New York City will support the cryptocurrency industry. There is no real interest from the city council or career city officials,” said John Kaehny, director of Reinvent. Albany, a non-profit organization that oversees state policy in which New York is located. The rules for crypto companies are also tougher there than elsewhere due to a commercial license specific to this industry, “BitLicense”, which is known to be one of the most difficult to acquire in the market.
Why does the city councilor not give up? Adams is aware that the Big Apple is home to nearly 20% of the workers in this industry, according to Bloomberg data. “El Salvador, Zug or Miami are very good, but when companies want to grow, they will need talent and regulation to legitimize themselves,” said Alexandre Stachchenko. All of this is already in New York, the temple of traditional finance, or in San Francisco, the capital of new technologies, where former head of Twitter Jack Dorsey has installed his fintech Block (ex-Square). Outside the United States, cities like Tel Aviv, the queen of start-ups, seem to have the profile as a future big place for cryptocurrencies. But also other major cities like London, Tokyo, Hong Kong … and why not Paris, which already hosts unicorns like Ledger or Sorare?
Admittedly, Europeans are more discreet on the subject. On March 14, they even caused cold sweats in the sector when they almost passed an amendment that put “the proof of work” or the method of validating bitcoin and ethereum transactions on the hot seat. “The European Union is shooting itself in the foot,” lamented the deputy for Paris Pierre Person. The reviled change was finally rejected, but the crypto sector is now no doubt hoping for a little more explicit welcome signs. In Belgium, deputy Christophe De Beukelaer announced earlier this year that he would convert his entire salary to bitcoin. A bit like Adams and Suarez. Can we imagine Anne Hidalgo doing the same thing one day?
8% of the French have invested in cryptocurrencies
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$ 43,000 : the value of a bitcoin at the end of March
$ 44 billion traded to NFTs in 2021
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