A major California city is turning to cryptocurrency as a possible hedge against Trump cutting off its funding
- Elected officials in Berkeley, California, are exploring the launch of an initial coin offering to raise funding for affordable housing.
- Berkeley City Council Member Ben Bartlett said the idea came from a desire to create some financial independence from the federal government.
- President Donald Trump has threatened to cut federal funding from sanctuary cities, and has specifically targeted Berkeley in tweets.
The City of Berkeley, one of the epicenters of liberal California, is considering a turn to cryptocurrency to reduce its reliance on federal funding in the Trump administration.Advertisement
Berkeley would become the first city in the US to hold an initial coin offering (ICO) - a type of crowdfunding campaign that's become popular in the past year. The city would raise funds by selling digital assets called "tokens" that are backed by municipal bonds, a type of security issued by the local government. Buyers might spend these tokens at shops and restaurants or even pay rent at apartment rentals that participate in Berkeley's cryptocurrency ecosystem.
The goal is to raise funding for vital city projects like affordable housing and support services for the city's growing homeless population. Someday, homeless people might receive tokens to buy goods and services from local businesses that accept the currency, according to city leaders.It's all talk for now, but according to Berkeley City Council Member Ben Bartlett, the creation of the city's own financing mechanism is a key part of building resiliency in the Trump era.
"Berkeley is the center of the resistance, and for the resistance to work, it must have a coin," Bartlett told Business Insider.Bartlett has formed a committee with Berkeley Mayor Jesse Arreguín, financial technology startup Neighborly, and the UC Berkeley Blockchain Lab to hatch a strategy for the ICO. Neighborly's cofounder and COO Kiran Jain said the city could launch its ICO, which it's calling an "initial community offering," by mid-May if the necessary approvals come through.
City leaders say Trump's tax reform will be punishing for BerkeleyThe idea for an ICO came about after President Donald Trump signed the Republican tax bill into law at the end of December, according to Bartlett.Advertisement
The new legislation makes sweeping changes to the tax code for businesses, some of which undermine incentives that encourage private contractors to build affordable housing. An analysis by consultant and public accounting firm Novogradac & Company suggests the tax bill could reduce the future supply of affordable rental housing by nearly 235,000 homes over the next 10 years.
Berkeley is facing a shortage of affordable places to live, leading to gentrification, rising rents, and homelessness. The city counted nearly 1,000 homeless people last year. This represents a 17% increase from 2015 and a 43% increase from 2009, according to city data."We have a jobs explosion and a super tight housing crunch," Bartlett said, adding, "You're looking at a disaster. We thought we'd pull together the experts and find a way to finance [affordable housing] ourselves."Advertisement
Bartlett said he expects the city's affordable housing budget to shrink under the Trump administration. An ICO offers a way for the local government to adapt, he said.
Berkeley wants to put bonds on the blockchain
Jain said the "initial community offering" will differ from traditional initial coin offerings.In the same way the dollar was once backed by gold, a token from Berkeley will be backed by a security called a municipal bond. Advertisement
When governments need money to finance projects that serve the public good, they raise funding by issuing municipal bonds. Cities, states, and counties use the money to build schools, highways, and affordable housing, and they pay back bondholders with interest over time.
The city of Berkeley is effectively leveraging the blockchain - the technology at the heart of bitcoin and other cryptocurrencies - to sell municipal bonds. Bonds don't offer enticing returns compared to stocks and other investments, but the city hopes a tokenized version might appeal to residents who care about building affordable housing and helping the homeless."Unlike most of the ICOs which deliver coins for a future value or service, these coins will represent a real security issued for a specific purpose," Jain said.Advertisement
The exploratory committe behind the ICO will announce the full deal terms this spring.
Berkeley has a giant target on its backBerkeley has another reason to develop a financial system outside of the federal government: It's the original sanctuary city, which makes it a safe haven under the law for refugees and undocumented immigrants. And that status doesn't go over well in Trump's administration.
Elijah Nouvelage/Getty Images
As Trump continues to crack down on illegal immigration, elected officials in Berkeley have been strengthening their policy of refusing to cooperate with federal immigration officers. Tensions between Trump and the city reached a boiling point in February 2017, when the president vowed to pull federal funding from UC Berkeley after the campus experienced violent protests over the cancellation of a speech by conservative provocateur Milo Yiannopoulos.
The City of Berkeley could lead the way for other sanctuary cities to create financial independence from the federal government, Bartlett said."It's actually enabling us to fulfill our duty as a government. Our duty is to provide for our people. It's a violation of that duty to allow people to sleep in the streets," Bartlett said.Advertisement
- Record 24,850 COVID-19 cases in single day in India
- Kanye West joins the US Presidential race – gets support from Elon Musk
- In a COVID-19 world, Artificial Intelligence is tailoring a perfect fit for the fashion industry
- Delhi LG inaugurates world's 'largest' COVID care centre
- Goa councillor dies of coronavirus infection