City Of Berkeley Plans To Launch An ICO And Cryptocurrency To Fund Affordable Housing

It’s not everyday that you hear about a major U.S. city planning to launch its own ICO and cryptocurrency. The city of Berkeley – one of the epicenters of liberal California – is doing just this though, and hopes to encourage other cities throughout the nation to follow its lead.

The Berkeley “ICO” is unique from all other initial coin offerings in that it actually stands for an “Initial Community Offering.” Yet while Berkeley’s ICO is somewhat of a play on words on the crypto crowd funding model, the use case for it is intended to solve a problem that goes well beyond raising capital for blockchain-based initiatives. Rather, Berkeley’s ICO, which is planned to launch in May, will be used to fund affordable housing to support the city’s growing homeless population.

According to Berkeley City Council Member, Ben Bartlett, the idea to launch an ICO came about after President Donald Trump signed the Republican tax bill into law at the end of December.

“This is not your typical ICO, but rather an initial community offering. We decide to explore new forms of finance in response to the cuts from DC and corporate tax cuts that took away our ability to fund affordable housing,” Bartlett, told me. “There are more than one-thousand homeless people living in Berkeley, which is projected to increase by a factor of five in the coming years. Many cities, just like Berkeley, are under a funding assault – we have to think outside of the box in order to solve this problem. We did this a decade ago with PACE financing and now it’s time to do it again.”

Ben Bartlett

The new legislation passed by President Trump has enforced major changes to the tax code for businesses, some of which could discourage private contractors from building affordable housing.

As a result, the San Francisco Bay Area and the Berkeley homeless population could be greatly impacted. The city of Berkeley alone counted nearly 1,000 homeless people last year . According to city data, the homeless population in 2017 increased by 17% from 2015 and by 43% from 2009.

To put things into perspective, Congress approved a sweeping overhaul of the federal tax code in 1986, which encouraged the private sector to invest in affordable housing. This was known as the low-income housing tax credit (LIHTC). According to the U.S. Department of Housing and Urban Development (HUD), as of 2016 the LIHTC was authorizing the use of $8 billion in tax credits annually and has resulted in the creation of approximately 2.8 million affordable housing units.

However, the Republican tax plan approved in December of last year will result in major cutbacks, impacting the development of affordable housing. And although the LIHTC was not eliminated by the tax bill, it’s value decreased from 35% to 21% as a result of the reduction in the corporate tax rate.

According to analysis from the national accounting firm, Novogradac & Company, the new tax law will reduce the growth of subsidized affordable housing by 235,000 units over the next decade.

It Takes A Village… And Blockchain Technology

In response to the impact corporate tax cuts will have on affordable housing, Berkeley’s ICO is intended to help the growing homeless population by funding homeless endeavors. The city plans to do this by selling “crypto enabled microbonds” to raise capital for this project.These bonds will have a small return rate (think public rates) and are intended to be tax exempt.

While this concept is similar to digital currencies, these bonds are backed by municipal bonds, which are a type of security issued by the local government. The city hopes a tokenized version of these bonds will appeal to residents who want to help build affordable housing for the homeless.

“Twenty years ago we had a local currency called ‘Berkeley Bucks’ – this is similar to that model, but this time we are applying blockchain technology as well. These microbonds are issued via a blockchain that the UC Berkeley Blockchain Lab is designing. Once bonds are issued, the community will decide on projects they want to fund. And because this is built on the blockchain, this model is faster, more cost-effective and eliminates all middlemen,” Bartlett explained.

In the future, Berkeley city leaders hope to see this model become mainstream to advance innovations such as allowing the homeless population to use these tokens to purchase goods and services from local businesses that will accept the digital currency. There is also the possibility for individuals who help the homeless to be rewarded with tokens in exchange for their good deeds.

According to Bartlett, the responses to Berkeley’s ICO thus far has been tremendous. The project is focused entirely on community building, which is attracting many people who wish to participate. The real challenge, however, is to keep the ICO small enough to spark true innovation.

“If we can open up crypto finance and democratize it for specific needs, then this can become much larger in the future, which is the goal. The real challenge now though is keeping it small. Berkeley University Alumni are global and many of these people want to participate. Right now we need to make these bonds targeted and specific so that we can break ground.”

More City Wide ICOs?

As the cryptocurrency craze continues to take the San Francisco Bay Area by storm, it really shouldn’t come as much of a surprise that the city of Berkeley would jump on the ICO bandwagon. What’s really interesting though is the impact that Berkeley’s ICO could have on other major cities.

Bartlett told me that people from upstate New York and in other parts of California have already reached out to him in hopes of learning more.

“They say that Berkeley is California five years later and that California is America twenty-five years later. People from upstate New York and Massachusetts have already reached out because they want to see how we are going to launch this ICO,” Bartlett said. “Clearly, the need for funding is severe. Yet, it’s about more than just funds – it’s also how cities function with federal restrictions. The federal government is simply not funding the basic things cities have to deliver for people’s well being. People are now looking for new ideas.”

While it’s too soon to predict if Berkeley’s initial community offering will encourage more city-wide ICOs, the innovative way to fund affordable housing is promising for the cryptocurrency community. The impact that ICOs are having on various sectors, including those of major cities, is truly groundbreaking.

Source link



Leave a Reply

Your email address will not be published. Required fields are marked *

On Key

Related Posts

Bitcoin and XRP Play to the Top!

There has been a notable rally in the cryptocurrency markets today. The price of Bitcoin (BTC) briefly surpassed $58,000 again, while Ethereum (ETH), Solana (SOL)