The mayors of Miami and New York City have taken their salaries in cryptocurrencies. An Arizona state legislator wants to declare Bitcoin legal tender. From Florida to Wyoming, state and local officials have put forth or even carried out plans to accept various taxes in digital tokens — developments sometimes touted as a challenge to the U.S. dollar’s dominance.
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Is crypto suddenly becoming official? Hardly. The attention being paid to these efforts far exceeds their likely consequences. As long as people aren’t inclined or compelled to take them too seriously, then governments should be free to experiment as they see fit.
The hype surrounding virtual assets and blockchain technology isn’t entirely unjustified. Properly regulated, digital currencies — issued by either private organizations or by the government — could save consumers and businesses hundreds of billions of dollars in transaction fees, connect more people to the formal banking system, and simplify international payments. They could even make the whole financial system more resilient, by reducing its reliance on a small group of crisis-prone banks.
Yet that brilliant future remains distant, and the state and local initiatives at issue have little to do with making it happen. On the contrary, they appear largely performative, aimed at generating publicity and latching on to the current crypto frenzy, which has more to do with zero-sum speculation than with creating value and improving the financial system.
As things stand, getting paid or paying taxes in digital tokens is far from appealing. Most cryptocurrencies are too volatile for such purposes: The dollar value of New York City Mayor Eric Adams’s first crypto paycheck, for example, fell an estimated 15% in the first days after he received it. Tokens tied to the dollar aren’t particularly reliable either. Transacting in virtual coins can entail processing snags and unpredictable fees, or require trusting intermediaries that don’t meet traditional standards. Then there’s the ever-present risk of losing one’s crypto or having it stolen.
Read the full article here by The Editors, Advisor Perspectives
