Berkeley Plans to Launch Its Own ICO
The city of Berkeley, California could become the first city in the United States to launch its own ICO, which is called an “initial community offering”. According to the latest news reports, the ICO is an attempt by the city to become more financially independent. If the liberal city decides to follow through with its plans, then its ICO will be introduced this year in May. Funds will be raised by selling virtual coins, which will be backed by government-issued municipal bonds, a prospect that is highly new in the crypto-world.
Normally, governmental entities issue municipal bonds in order to fund capital projects such as the construction of school buildings, roads, or even airports. In case you’re unaware, when someone purchases municipal bonds, which are also classified as debt securities, they’re actually lending money. The money is lent to the entity that issues the bonds, and in return, the lender usually receives periodic interest payments along with the return of the principal after a predetermined amount of time (maturity date). This is pretty much how traditional bonds work. Now, the city of Berkeley is planning to utilize blockchain technology in order to sell digital tokens backed by municipal bonds.
These tokens will have real-world value because buyers would be able to use them to pay for items purchased from city restaurants and shops. They might also be accepted as rental payment if the property owners decide to become a part of Berkeley’s cryptocurrency project. Per city officials, it’s quite possible that these tokens could be issued to the homeless as well, to help them pay for basic necessities.
A Response to Trump’s Threats
With this new initiative, Berkeley is hoping to attract more investors who might already be involved in the cryptocurrency market. According to city officials, they’re entering the cryptosphere because of the Trump administration’s controversial tax cut plan. If you’ve been following American news channels, then you might be aware that the Trump administration has threatened to reduce funding to “sanctuary cities” like Berkeley.
Reportedly, Trump’s new legislation cuts down the financial incentives for private contractors to build homes at an affordable cost. In fact, research performed by Novogradac & Company LLP, a national certified public accounting firm, determined that Trump’s tax bill might reduce affordable rental housing production by approximately 235,000 homes within the next decade. Research also indicates that rental prices are significantly increasing. Ben Bartlett, a city council member, remarked, “Berkeley is the center of the resistance, and for the resistance to work, it must have a coin”.
Berkeley’s Collaborative ICO Project
Berkeley’s ICO plan is the product of a collaboration between Mr. Bartlett, UC Berkeley’s Blockchain Lab, Jesse Arreguín (city mayor), and Neighborly (a new company that aims to improve access to public finance). One the main goals of this ICO is to raise enough capital to provide affordable housing and help the city’s growing homeless population. City data shows that a number of homeless individuals has risen by 17% since 2015, and by as much as 43% since 2009.
Mr. Bartlett mentioned that currently, his city is experiencing, “a jobs explosion and a super tight housing crunch…You’re looking at a disaster. We thought we’d pull together the experts and find a way to finance [affordable housing] ourselves”. Apparently, the “experts” feel that an ICO may be an answer to their housing problem. However, the parties involved in the city’s crypto-project will have to keep in mind that they must adhere to ICO regulations. Per the U.S. Commodity Futures Trading Commission (CFTC), ICOs are basically selling securities. Therefore, they must register with the CFTC the same way someone who’s selling traditional securities would. Failure to do so could result in legal action.
In a first-world country like that United States, problems such as homelessness should not exist. Maybe these types of issues are a byproduct of the conventional and capitalistic financial system. It should be interesting to see if the emerging crypto-economy can solve some of society’s most basic problems.