The cryptocurrency war rages on, from New York to El Salvador

New York City Mayor Eric Adams is all smiles in this video posted in late January on Twitter. Logic: it’s his first pay day at City Hall. But the moment is special for another reason. Taking up a promise from his Miami counterpart, Francis Suarez, and with the help of the Coinbase platform, his check for just under $10,000 was immediately converted into bitcoins and ethers, the two most popular cryptocurrencies. most valued in the world.

This shallot race between two mayors of megacities is one of the many examples of the new battle around these digital tokens. “Until 2021, very few politicians would dare to say ‘bitcoin is good.’ with a touch of irony Alexandre Stachchenko, Director Blockchain & Cryptos at KPMG France. But the overall cryptocurrency market now represents nearly $2 trillion in valuation, including more than $800 for bitcoin alone.

A sufficient argument for Suarez and Adams to try to welcome the players in this booming ecosystem with open arms. They are not the only ones. Every week or so, a large metropolis enters the dance, with great fanfare. In mid-January, in Brazil, the mayor of Rio de Janeiro Eduardo Paes announced that he would invest 1% of the public treasury in bitcoins and the launch of “Crypto Rio”, a local cryptocurrency. Despite a very heavy fall in prices at the end of January, this appetite is not about to be satisfied. Crypto is already fueling the large NFT market ($44 billion in 2021), and tomorrow will be at the heart of the metaverse and Web 3.0. “The environment will continue to grow for at least the next twenty years,” predicts Alexander Stachchenko.

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Who has the best weapons?

In this battle, it is difficult not to mention El Salvador. The very connected President Nayib Bukele took a risky bet by being the first to make bitcoin legal tender. A strategy strongly frowned upon by the International Monetary Fund (IMF), which is concerned about the impact of bitcoin volatility on the Salvadoran economy. In a country where a significant part of the population does not have a bank account and receives Western Union transfers, however, bitcoin also has virtues (low cost and speed of exchanges). Since then, Bukele has multiplied invitations to the sector, announcing the creation of a Bitcoin City and the exemption from income and land taxes for its future inhabitants. “Basically, there is no risk for him: his policy should create jobs, wealth, and VAT, believes Sébastien Gouspillou, boss of the company BigBlock Datacenter, to whom we have proposed to transfer its French activities there.

The Salvadoran president is betting that his strategy will energize his country, which is relatively poor and dependent on the dollar. The calculation is the same in Puerto Rico. The American island, badly impacted by the financial crisis and Hurricane Maria, is looking for a new lease of life. The argument is ground. “Our banks are regulated by the federal government, in US dollars, but our tax system is that of a Caribbean tax haven, thanks to Act 22, unique in the United States, and which exempts residents of capital gains, interest and dividends,” said Juan Carlos Pedreira, one of the spokespersons for the Blockchain Trade Association. And it works. According to local “Crypto Rico” authorities, the number of requests for tax breaks from new residents hit record highs in 2021.

In the rest of the world, especially where the tax advantages are less, the focus is on political will. A weapon not to be underestimated. The industry must indeed endure volatile prices, but also the growing hostility of certain countries. In the spring of 2021, China caused an earthquake in the sector by stopping the mining of bitcoins on its soil, when it was home to more than half of the world’s activity. In this uncertain landscape, crypto businesses are more eager than ever to find a stable and reassuring environment.

“How can I help?”

It is on this cord that many American cities of the second rank which would see themselves at the top of the bill are playing. Like Austin (Texas), which in 2022 will host one of the most important crypto events of the year, CoinDesk’s “Consensus”. But also Cheyenne, Wyoming, a state ahead of the legalization of decentralized autonomous organizations, also called DAOs. And of course Miami, where its mayor has become a real CEO in order to personally support all companies wishing to set up in its territory. His slogan, “How can I help?”has become a website and is available in giveaways. These efforts are bearing their first results. The most important city of Florida attracts big fish, like the star investor ,, or the American headquarters of, which has invested the “Magic City”… leaving New York behind.

For a last category of cities or small nations, it is finally a question of preserving its rank, its societies, its wealth. Switzerland, renowned in the banking sector and wealth management, understood this very quickly. Its canton of Zug, which has the lowest tax rate on corporate profits in the country, positioned itself in 2015 as the new “crypto-valley” and now hosts nearly a thousand companies. or blockchain-related foundations.

Still, Adams, in the Big Apple, seems to be walking on eggshells. “New York City is extremely unlikely to support the cryptocurrency industry. There is no real interest from the city council or career city officials,” said John Kaehny, director of Reinvent. Albany, a nonprofit organization that monitors state politics in which New York is located. The regulations for crypto businesses are also tougher there than elsewhere, due to a commercial license specific to this industry, the “BitLicense”, reputed to be one of the most difficult to acquire on the market.

Talent issue

Why doesn’t the city councilor give up? Adams is aware that the Big Apple is home to nearly 20% of workers in this industry, according to Bloomberg data. “El Salvador, Zug, or Miami is very good, but when companies want to grow, they will need talent and regulation to legitimize themselves,” said Alexandre Stachchenko. All this is already in New York, temple of traditional finance, or in San Francisco, capital of new technologies, where the former boss of Twitter Jack Dorsey has installed his fintech Block (ex-Square). Outside the United States, cities like Tel Aviv, queen of start-ups, seem to have the profile of a future major place for cryptos. But also other major cities like London, Tokyo, Hong Kong… and why not Paris, already host to unicorns such as Ledger or Sorare?

The Europeans are, it is true, more discreet on the subject. On March 14, they even caused cold sweats in the sector, when they almost adopted an amendment putting on the hot seat the “proof of work”, or the method of validation of bitcoin and ethereum transactions. “The European Union is shooting itself in the foot,” lamented the deputy for Paris Pierre Person. The maligned amendment was finally rejected, but the crypto sector is no doubt now hoping for a little more explicit welcome signs. In Belgium, the deputy Christophe De Beukelaer announced at the beginning of the year to convert all of his pay into bitcoin. Kind of like Adams and Suarez. Can we imagine Anne Hidalgo doing the same one day?


8% of French people have invested in cryptocurrencies

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$43,000 : the value of a bitcoin at the end of March

$44 billion traded for NFTs in 2021


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Abnousse ShalmaniAbnousse Shalmani

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