The writer is a contributing editor FT
Earlier this month, Francis Suarez, the mayor of Miami, announced that he would get his next payment in bitcoin. The new mayor of New York responded that he would take the next three. This kind of good-natured puffiness is the norm among American mayors.
And it’s not a terrible idea to equate your salary with a valuable asset, or at least convert it as soon as you can. For example, when I finish writing, I plan to ask the editor to pay me in real estate.
What Suarez and Adams are really doing is announcing their benefits to crypto developers and investors. This week, crypto.com, a trading platform, agree to pay $700 million for the naming rights to the arena where the Los Angeles Lakers play basketball. This could mark the peak of the bubble or the beginning of the next industrial revolution, but any mayor would be foolish not to invite into a potential tax base while we all wait. see what happens next.
Behind Suarez’s announcement, however, is also a more insidious set of actions designed to anchor crypto more heavily to Miami’s balance sheet. These include an alliance with the creators of a cryptocurrency called MiamiCoin. There is a long history of cities producing their own money. But in the past, production came with monetary sovereignty – the ability to control quality and volume. Miami is kicking off a novel experiment: it’s lending its name to a sum it doesn’t control.
The financial center is not just a place where a lot of capital is available. Finance is a set of tools. If you want them to work at all, you need to put a lot of people in the same place who know how to use them. Fernand Braudel, who wrote the vast economic history of medieval Europe, described financial skills as an “inherited asset,” slowly accumulated through daily commerce. .
In the 13th century, Leonardo Fibonacci brought Arabic numerals and the abacus to Pisa. Towards the end of that century, merchants in northern Italy – possibly in Florence – developed double-entry bookkeeping. It spread in part through the 1494 publication of Summa de Arithmetica, a text by Luca Pacioli, a Venetian. Italian cities did not invent credit money. But they made it more efficient – easier to use and easier to create. However, this increase in efficiency does not happen by accident. Historian Peter Spufford has recorded how the teacher Lay appeared in Florence and Venice to encourage literacy and numeracy. The City of Lucca has rented a abbachista, a teacher of commercial accounting, specifically to help the city’s merchants.
In Miami, Suarez’s signal is fundamental 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 receive their salaries in bitcoin, and Suarez said he also wants to be able to collect taxes in bitcoin. It’s all still an economic development plan – trying to incentivize the use of crypto, in the hope of attracting more crypto abbachistas.
The city also had the beginnings of its own monetary policy, although one where Renaissance Italy provided less of a model. In August, miners started to produce MiamiCoin, currently Commerce as the MIA. Miners are not tied to the city in any way. MIA sits on Stack, a blockchain or an electronic ledger of transactions. Stacks uses bitcoin as a reserve and settlement asset – in the same way that commercial banks use reserves held at the US Fed. The MIA manufacturing miners provided the City of Miami with a 30% stake in their profits.
In September, Miami city commissioners voted to accept that stake, last week worth $21 million. This is a kind of seigniorage – profit from the production of money. The city earns profit in money, but no currency control. This is a departure.
Bitcoin advocates like to point out that Italian cities are already producing high-value coins and coins – hard money, like bitcoin. That is only partially true. Gold is for long distance transactions, but Venice and Florence also maintain a supply of silver coins for smaller home transactions. Overtime, they made those coins smaller, to keep prices steady as their economies expand. The merchant cities in Italy are not money cultists. They retain their monetary sovereignty, carefully depreciating their local currency over time because they are growth advocates.
Essentially, cryptocurrency is a bet that the production of money must be entirely a private matter. 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 things for some people. Soft money and loose credit are good for everyone else. When countries – and cities – claim monetary sovereignty, they are mediating between different interests. This is the basic work of any state.
If MiamiCoin grows and coin contracts become part of everyday life in the city, eventually the City of Miami will have to decide if it needs to claim not only a portion of the profits from the MIA, but also some control measures, also.
