Mary Scott NabersThere is a significant trend to watch as cryptocurrency gains momentum and acceptance. If this trend continues, it will bring about many changes throughout America.
The total global value of cryptocurrency now is approximately $3 trillion, and while that may sound small considering the world’s GDP, it is significant because of how quickly that value has been established and the fact that it is happening worldwide. Approximately 40 million Americans, including approximately three in 10 between the ages of 18 and 29, have already engaged in some form of investment, trade or other use of cryptocurrencies.
Surprisingly, the U.S. government also holds far more Bitcoin than any other government. In fact, America’s 207,000+ Bitcoin holdings are currently worth at least $5 billion. Now, citizens and investors who initially thought that cryptocurrency would fade away are realizing that it’s here to stay.
Public agencies at every level of government in America are moving into cryptocurrencies. Many have already adopted cryptocurrency guidelines, and others are investing in cryptocurrencies.
A U.S. senator recently proposed a plan to establish a national strategic stockpile of Bitcoin. There appears to be other political support for this as well. One reason is that, with almost all successful cyberattacks involving ransomware, the payment demanded is only acceptable in cryptocurrency. That is because it is quick and untraceable. Cryptocurrency, typically Bitcoin, has become almost the universal way criminals extort vast sums of money from across diverse sectors with incredible speed.
Congress is considering ways to handle cyber breaches, particularly the new ransomware attacks. Rulemaking conversations are underway. One bill entitled Reporting for Critical Infrastructure Act was signed into law in 2022. It mandates incident reporting of substantial cyber-attacks and any ransomware payments made.
State investment boards and pension fund holdings now represent significant public investment in cryptocurrency. Many state pension funds hold bitcoin exchange-traded funds (ETFs). Michigan, Arkansas and Wisconsin are cryptocurrency investors. The Michigan Retirement System has $6.6 million in shares of Bitcoin ETF. State officials in Wisconsin have reported holding a total of $160 million in Bitcoin ETFs. These are certainly not the only states holding cryptocurrency investments.
The mayor of Jersey City has announced plans to invest in bitcoin ETFs, showing that cryptocurrency investments occur at various levels of government, not just at the state and federal levels. The city of Portsmouth in New Hampshire now accepts cryptocurrency as a form of payment for bills. Residents can use this payment option when paying bills online. This form of revenue can be used to pay any outstanding debt to the city, such as property taxes and the program has been in place since 2022. As governmental jurisdictions become comfortable with cryptocurrency, it reinforces public acceptance, and the trend gathers strength.
A cryptocurrency experiment in Miami generated about $15 million for the city over several years. In 2021, the city announced a new type of cryptocurrency called Miami Coin. The coin was created to allow people to hold and trade coins that represent a stake in a municipality, like owning stock in a company. When Miami Coin was mined, a small percentage of the value was automatically sent to the city as revenue. The fund continued to grow until officials decided to cash out.
In 2022, Fort Worth, Texas, became the first city in the United States to mine bitcoin due to a unanimous vote by the city council. One objective was to promote Forth Worth as a place that welcomes technology and innovation. Cryptocurrencies like Bitcoin run on a “proof of work model” where computers solve a complex math problem to earn cryptocurrency as a reward. This process uses a lot of electricity because numerous machines are used to generate enough computing power. Still, due to the project, Fort Worth has become a welcoming destination for cryptocurrency firms. Tarrant County has benefitted over the last two years from having companies located there to be closer to where the mines are being built.
The rapid expansion of cryptocurrency mining has led to significant investments in infrastructure in smaller communities. Water availability and low-cost power are two critical components that cryptocurrency mining officials seek. Many firms of this type seek new destinations to build these plants or data centers. In Texas, the city of Rockdale has become a central hub for cryptocurrency mining. The proximity to water and a favorable regulatory environment are both critical to cryptocurrency operations. In Rockdale, local authorities have partnered with private companies to boost the city’s power capacity, and this, coupled with access to ocean water, has solidified the essential requirements for crypto mining.
States are beginning to regulate digital currency, and at least 35 states have introduced or passed legislation governing cryptocurrency and digital assets. This year, the Virginia Senate passed a law that directs the state’s Commission on Technology and Science (JCOTS) to analyze the use of blockchain technology, digital asset mining and cryptocurrency. The bill also mandates collaboration with other commissions and organizations to assess technologies and make recommendations to foster their appropriate expansion in Virginia. That report is due by the end of 2024.
Ohio’s House Bill 406, also known as the Ohio Blockchain Basics Act, will regulate the state’s approach to digital assets and blockchain technology if passed. The bill proposes to prohibit specific actions by state and local governments regarding digital asset mining, exempt specific digital currency transactions from state and local income taxes, and prohibit local charges of digital assets. It would require the state retirement system to evaluate digital asset investments. If passed, New York’s Senate Bill 7906 would require the New York State Energy Research and Development Authority to conduct a study on powering cryptocurrency mining facilities with renewable energy.
These examples, among many others, demonstrate the increasing acceptance of cryptocurrency and the growing certainty that new laws, regulations and mandates will soon follow. This is a trend to watch in America.
