Published: January 20th, 2020
– In October 2020, Konya will host the Smart Cities and Municipalities Congress and Exhibition. During the same time, the city will launch “city coin,” Konya’s cryptocurrency. The city hopes to improve efficiency in service delivery by allowing the city residents to use the coin to settle everyday transactions.
Uğur İbrahim Altay, the Mayor of Konya, the seventh most populous city in Turkey has announced plans by the city to launch a cryptocurrency. Dubbed “city coin,” the cryptocurrency will help improve efficiency by giving Konya residents a convenient way to pay for day-to-day transactions.
If implemented successfully, Konya will be in a list of few cities in the world that have plans to or have adopted cryptocurrencies as a payment method for municipal transactions. The city’s administration plans to use city coin to collect sales taxes more efficiently. Konya hopes to adopt an all-inclusive cryptocurrency-related ecosystem, and city coin is the starting point.
The news is not surprising, at least not in Turkey. President Recep Erdoğan and the national government have been advocating vigorously for the country to adopt cryptocurrencies. In November 2019, the Bitcoinist, an online blockchain-related publication ran an article that highlighted the country’s intention to release a state-backed digital asset.
According to the article, the Digital Lira or Crypto Lira is set to be released sometime in 2020.
Konya is not the only city to float such a proposal. In 2018, Slovenia intimated that it planned to unveil BTC City, a technopolis built from the ashes of a now-defunct commercial shopping district of Ljubljana. According to the plans, transactions in BTC city shall be carried out only in cryptocurrencies.
Konya and Ljubljana join a slim but growing list of cities that want to be financially smart. The reasons why these cities want to adopt crypto is equally growing. Dubai unveiled emCash in 2017. The reasons, however, were not so clear leading some pundits to quip that the Arab Emirate was only looking to flex its high-tech capability as a smart city.
Berkeley in California has also proposed an idea for crypto. The Californian city hopes to tokenize the process of funding municipality bonds. By doing so, the city hopes to raise the amount of investment coming from the larger California and beyond.
In Venezuela, a host of cities are fronting Petro, which the country unveiled to help supplement Bolívar Fuerte, the country’s plummeting domestic currency. Petro is an example of efforts by municipalities trying to push for regional cryptocurrencies. Reports, however, show that there are no signs of an actual petro token ever released or even a smart contract in existence.
The South Korean capital has also tabled suggestions to create S-coins. Seoul wants to use the cryptocurrency to fund social welfare and other related programs. The city’s reasons are, however, a lot more elaborate than that. Speaking during the unveiling, Seoul’s mayor said the intentions also include improving efficiency in administration as well as advancing the technology status of the city.
All these examples of cities fronting cryptocurrency projects come in the backdrop of similar undertakings backed by various national governments.
In October 2019, The Fortune reported that the People’s Republic of China was inching closer to releasing a cryptocurrency backed by the government.
Launching of state-backed crypto coins has, however, been an activity with not much fanfare. Several attempts have ended up with the governments in question distributing no tokens. Moreover, government-backed cryptocurrency projects have considerably bigger legal challenges.
Estonia came under fire from the European Union for releasing Estcoin. The EU opposed the idea of a country in the Eurozone using another currency in place of the Euro.
According to Sheila Warren, the head of the World Economic Forums’ blockchain and distributed ledger technologies project, cities that are launching cryptocurrencies are doing so to open up avenues for investment. She adds that such cities are only looking for more ways of funding projects that they have been unable to sponsor in the past.
The initial community offering in Berkeley, for instance, is supposed to enable the city to give its citizens an easier way to purchase municipal bonds. In so doing, Berkeley gets to raise enough money to construct affordable housing, support social services, and rebuild the city’s transit system.
Cryptocurrencies are also cheap and accessible. Campbell Harvey, a finance professor at Duke University says that if you tokenize a bond, you increase the chances of an average person investing. Besides, tokenizing bonds makes the process of purchasing them easy.
Tokenization also makes a product attractive. When cities switch to tokenized bonds, it is easier for them to convince residents that care about poverty to purchase, say, $100 worth knowing that such contributions go towards improving social services. Besides, the residents can spend the investment on groceries, or transit rides or they can hold on to the bond and wait for its maturity.
Municipal cryptocurrencies can improve convenience for residents. The emCash coin, for instance, is supposed to transition Dubai from fiat to a cashless economy. The emirate hopes that by releasing the crypto coin, its residents will afford to procure services and buy goods using crypto just as easily as they would if they used fiat currency.
Most people have come to associate cryptocurrencies with deep investments. This ideology is a risk that the cities involved in these projects could be facing. There is a chance of creating a bubble; a lot of money may be coming into these cities, which is a great thing. However, this could be money that has been diverted from someplace else. Once the excitement of the project dies, the investors may be tempted to do a digital run.
Konya is gearing up to join a growing number of cities that have announced plans to launch cryptocurrency projects. Such undertakings come with several benefits for both the cities and their residents. However, there are risks that these cities need to understand before they can delve deep into the projects. Are the cities such as Konya looking at all the three sides of the coin?