Crypto has dropped in value. Why is Miami Mayor Francis Suarez still supporting it?

Miami Mayor Francis Suarez is still publicly promoting cryptocurrency following a crash in the price of Bitcoin that has led digital currency enthusiasts to discuss how to weather the downturn.

The mayor told the Miami Herald he still wants to make Miami a crypto capital. He said he is still converting 100% of his city salary into Bitcoin, though he declined to discuss his current cryptocurrency holdings. Recently released financial disclosures show that as of the end of 2021 he held a cryptocurrency account with $10,761.49.

Suarez also said he still wants to use his position as president of the U.S. Conference of Mayors to sponsor a “crypto compact” that would promote the use of digital currency and foster education about digital currency.

“Educating policymakers on how to derive utility from this technology will be pivotal in making it more ubiquitous in our lives,” Suarez said in emailed responses to questions earlier this month. “American citizens need to feel confident in their leaders’ ability to comprehend this highly transformative tech.”

The mayor’s continued enthusiasm for cryptocurrency comes as the world of digital currency has slipped into financial turmoil. The price of Bitcoin has hovered around $20,000 for about a month following several dips this year after peaking at around $68,000 in November.

Suarez’s support for the industry led organizers of the World Digital Mining Summit, an international conference, to invite the mayor to give opening remarks at its event in Miami Tuesday. He couldn’t appear in person due to a scheduling conflict, but he sent a prerecorded video message to welcome hundreds of attendees who came from around the world to the gathering, which was organized by Bitcoin mining hardware manufacturer Bitmain.

“Digital currency offers the potential for all of us to create a generation of prosperity for our children and their children,” Suarez said in his video. “While other cities and other countries attack cryptocurrency, mining and new Web3 technology, Miami has chosen to embrace this technology, welcome its engineers and entrepreneurs, and champion the digital revolution for all who seek a future that is free, fair and prosperous. “

Other speakers at the conference discussed the challenges of starting and maintaining Bitcoin mining businesses when the value has dropped, though they projected optimism about an industry that they say will be sustainable long term.

Mike Levitt, CEO of publicly traded cryptocurrency mining company Core Scientific, told the audience that the downturn in the Bitcoin market will lead to consolidation in the “young” industry. He also predicted that the industry would emerge from the downturn with new opportunities that will lead to profit.

Levitt’s company is the largest U.S.-based Bitcoin miner by computing power, and during the price drop it has sold much of its Bitcoin holdings to raise dollars to meet its obligations. Despite the industry’s financial turmoil, which has led to some crypto companies’ bankruptcies, Levitt encouraged miners to build up their businesses amid the market slump.

“We’re working to build a business model that we believe will endure for the long term,” he said. “Let’s face it, we all in this room think that this is a very long-term business. It’s just got some short-term volatility.”

MiamiCoin crash

That volatility was displayed in MiamiCoin, a cryptocurrency branded after the Magic City but not formally affiliated with the city government. Suarez touted MiamiCoin as a boon for the city because mining MiamiCoins results in money to the city. The process involves what can be described as a raffle involving a separate cryptocurrency token, Stacks. One can bid for MiamiCoins using Stacks tokens.

The winner can hold on to their MiamiCoins and “stack” them to receive rewards in Stacks tokens. The tokens used to bid for MiamiCoin go into a pool, with 70% going to those who choose to “stack” MiamiCoins and 30% going to a wallet for Miami’s city government. The city can have the Stacks converted into dollars. In February, the city received $5.25 million from the group that created the token, CityCoins, and the money has been earmarked for rental assistance for struggling tenants.

But MiamiCoin’s value has tanked since it peaked shortly after debuting in 2021. The token value has tumbled nearly 99% since its highest price of about 6 cents.

Suarez has consistently defended cryptocurrency amid the volatility, arguing that even in recent price drops, one Bitcoin is still far more valuable than the dollar. The mayor has conceded that MiamiCoin has not been a success as a new cryptocurrency, but he touted the dollars it put in the city’s coffers and continued to push the idea that city-branded tokens could help fund city governments.

“As I’ve said, innovation doesn’t always work, and unfortunately, MiamiCoin hasn’t been as promising as it first seemed,” Suarez told the Herald. “But I do take a lot of pride in the fact that we turned the money we did earn into immediate rental relief for Miami residents — it served as proof that this model has the potential to change the way local governments can create revenue streams and invest directly in quality of life improvements.”

The mayor’s push to make Miami a crypto capital has led critics to point out that the lack of regulation in the industry allows money to move anonymously, enabling criminals to operate outside a financial system with safeguards. Others have slammed Suarez’s comments on MiamiCoin as an irresponsible promotion of digital currency with no practical use and a problematic mining process.

Suarez has publicly stated he has spoken with CityCoins about adjusting MiamiCoin’s “tokenomics” — how the token is issued, how much is in supply and its utility.

Urban technology researcher Mike Bloomberg, who has experience working in local government, told the Herald the city should have identified MiamiCoin’s shortcomings before agreeing to accept money from the project.

“All that’s stuff embedded in the code. It was all laid out ahead of time,” Bloomberg said. “It was an incredible lack of diligence on the city’s part.”