Philly is exploring cryptocurrency to boost revenue. Heres what that means. – The Philadelphia Inquirer

PhillyCoin? GrittyCoin? HoagieCoin? Who knows what it might be called, but Philadelphia is exploring its own crypto.

City officials confirmed they are in very early internal discussions about donation-generating cryptocurrencies that other cities are adopting to boost revenues.

The city is in talks with CityCoins, a decentralized nonprofit that sets tech friendly cities up to receive 30% of earnings on coins mined in their name. Miami became the first big municipality to launch its own coin last year, and similar city-based coins have since surfaced in New York City and Austin, Texas.

Chief information officer Mark Wheeler went public saying Philly is ready to adopt the currencies, as first reported by the online cybersecurity publication State Scoop last week, but officials say there is no hard commitment yet.

The City is curious to understand the implications of fundraising or gift-agreement programs using a cryptocurrency as basis for donation in U.S. dollars, said Labonno Islam, spokesperson for the Office of Innovation and Technology.

Should the city proceed, a Philadelphia-based coin could become tradable in crypto markets worldwide and provide some passive revenue back to the city, but experts raise questions about risks, rewards, and transparency.

Heres what you need to know:

Blockchains, protocols, stacks we know, crypto is a lot to unpack.

At the heart of CityCoins is an open-sourced protocol called Stacks and a process called crypto mining. A complex computational process that requires specific hardware, mining is how crypto enthusiasts create all variety of coins and put them into market circulation. Those who successfully mine a new coin into existence earn coins in reward.

Think of CityCoins like a community where miners generate city-based tokens like a Philly coin. When a user mints a new coin here, 30% of the reward gets sent to a digital wallet belonging to City Hall, according to the nonprofits guidelines.

Think of this dividend as a philanthropic donation to the citys coffers. Municipalities can convert crypto donations into U.S. dollars and put them toward various programs.

A potential Philly coin would not come with significant overhead costs for the city, and if it does well on the market, it could essentially be free money for the city.

After MiamiCoin hit the market in August, Miami Mayor Francis Suarez estimated coin revenues could net $60 million in their first year, and the city has since made its first withdrawals, putting the proceeds toward a city rental assistance program.

Suarez and New York City Mayor Eric Adams have both had paychecks converted into crypto, as evidence of their commitment to the industry.

While the city has been boosting itself as tech friendly for years, Phillys focus seems to be on those potential pots of gold.

The City is looking for ways to sustain long-term initiatives that support equity across Philadelphia beyond philanthropic and traditional means, Islam said. This does not mean that cryptocurrency is the answer, but were taking an opportunity to gather more information and learn more about it.

City-based coins are marketed toward the citys natives, residents, and supporters. Pablo Molina, a cybersecurity policy expert and the chief information security officer at Drexel University, framed the appeal as less about the coin itself and more about branding.

To some extent, its like putting a Philly name on the T-shirt, Molina said. It doesnt make the T-shirt any better, but it makes it a lot more interesting and appetizing to some people.

Whether a Philly-branded coin proves to be a good investment is another question.

For starters, pandemic-battered cities like Philly need reliable revenue streams, and the crypto markets are inherently volatile. Despite big projections, no one is sure yet how stable city-based coins would be as a cash generator which makes them hard to plan around. Others have questioned how the city would financially account for its crypto revenues in general.

Some critics say the idea also raises moral concerns for the city.

Mark Headd, Phillys former chief data officer, called city coins pure nonsense a gimmick that could entice residents into get-rich-quick schemes, with few widespread rewards.

In a Medium post last week, Headd argued engaging with crypto was especially troubling for a city with a staggering poverty rate and a persistent digital divide like Philly. Even if the coin proves to be a good investment for the city and individual residents, he wrote, many Philadelphians wouldnt have the technical savvy to see any financial gains from it. And for those who can invest in Phillys coin, the coin still presents a volatile risk like other cryptocurrencies.

Molina said potential buyers should consider it more of a gamble than an investment. Some people will make a lot of money, but you should not be willing to invest what youre not willing to part with, he said.

Molina said there are also security concerns around the citys potential cut of the pie and whether revenues would be vulnerable to crypto fraudsters. The risk would be for the citizens who think theyre helping the city, Molina said. In the end, not much could go toward the city.

The Kenney administration is thin on specifics, but for now, its safe to say Philly wont be that unbearable guy at the party talking your ear off about crypto not yet at least.

Islam, the city spokesperson, said Kenney asked chief information officer Wheeler to coordinate with city attorneys and vet the legal obstacles presented by crypto-donations.

City Council will likely have questions about the coin before moving forward, but there were no scheduled talks on the horizon as of Tuesday.

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Philly is exploring cryptocurrency to boost revenue. Heres what that means. - The Philadelphia Inquirer