Opinion: Austin Can Do Better Than Crypto
As a city that values equity, we shouldn’t prop up an exploitative scam
If you watched the Super Bowl or ever look up at an Austin billboard, you know there's a flood of advertising proclaiming cryptocurrency as the money of the future. Ad after ad sells viewers on the idea that cryptocurrency is the next big thing: Don't miss the boat, you could make a fortune!
Yet, between November 2021 and February 2022, $1 trillion of the cryptocurrency industry's market value – including $600 billion in bitcoin value – went up in smoke. And this 45% decline was only the second largest in a long history of massive volatility and manipulation.
The seams of this massive, multilevel marketing scheme are showing, and early investors are looking for more people to buy in so they can cash out.
And unfortunately, the city of Austin is the next mark.
Last week in Austin, as SXSW kicked off and the tech bros descended, officials announced two resolutions that would give the city's imprimatur to the so-called "Web 3.0" movement. Council Member Mackenzie Kelly introduced a resolution that would require the city to consider accepting payments in cryptocurrency, while Mayor Steve Adler wants the city to explore every potential governmental use for blockchain technology.
These resolutions should be opposed for the same reasons we don't use city resources to encourage people to buy Pokémon cards or lottery tickets. Crypto is an investment scheme that is likely to injure poor and working-class people – and doesn't create value for the city as a whole.
Let's be clear – cryptocurrency is not a substitute for public money. Rather, it's a speculative cyber-collectible asset. The volatility is endemic, which serves the investor class, not working families. New York City Mayor Eric Adams lost $1,000 in a few hours after converting his paycheck to bitcoin. In a five-month period, Miami's City Coin lost 88% on the dollar. And a recent analysis showed that as of February 8, over 55% of bitcoin investors were under water.
The role of government here should be consumer protection, not hucksterism. The crypto industry needs federal securities and banking regulation. At every level of government, we need to rein in crypto's devastating environmental impact. In Texas, where our electrical grid is in constant danger of failure, we don't need more blockchain schemes soaking up available power. (Especially given that just one blockchain currency, bitcoin, uses as much electricity as the Netherlands.)
The politics of crypto imagines "separating money from state" as if we can just turn our societal problems over to an immutable line of code. But a government relying on a scarce commodity like bitcoin as money inherently leads to a rigid, zero-sum world where money cannot be provisioned and coordinated for public purposes like a New Deal (or American Rescue Plan Act). It's not a system of money – it's a Ponzi scheme to benefit the people who created the collectible.
Of course, that's not to say we don't need innovative thinking about finance and money, especially to promote equity and inclusion. There's a growing movement for public banking sweeping the country, building on a century of success with the Bank of North Dakota. Cities like Austin can issue local complementary currencies, with digital wallets and payment cards containing safe, privacy-respecting, public money usable for bills or riding the bus, and this could improve the liquidity and financial capacity of the city budget for social needs.
So let's have that conversation. But just because the crypto lobby is desperately showering cash across the political spectrum, at all levels of government, doesn't mean we should let our city be used by a classic pump-and-dump scheme. Instead of chasing a fad, let's work on real solutions to the problems we are facing.
Mike Siegel is an Austin resident and the political director of Ground Game Texas.