The MiamiCoin project has generated $22.5 million for the city. Now comes the hard part: using it

In a matter of months, Miami has received some $22.5 million from a private cryptocurrency project called CityCoins. 

But while generating the funds was easy, accessing and spending them is going to be tricky. 

The team behind the CityCoins project pitches it as a way to let citizens generate revenue for their city by “mining” their city’s token.

Functionally, CityCoins exists as a smart contract on the Stacks network, with payouts generated in the form of that network's native token, STX. For example, in order to mine MiamiCoin, users send STX to the dedicated MiamiCoin contract. Thirty percent of the contributions from miners are sent to a wallet controlled by the city – in this case, Miami – while the remainder is distributed to MiamiCoin holders who participated in so-called "stacking" lock-up periods.

The CityCoins protocol first unveiled MiamiCoin in August of 2021, and Mayor Francis Suarez has touted the project since its early days. He has estimated that the program could generate $60 million for the city over the course of the year. 

So far, even with the recent dip in BTC price, the wallet is steadily over $22 million, according to Suarez, and the mayor has said he’s planning to use the wallet’s funds to distribute a dividend in bitcoin to residents who set up a city wallet.

Behind the scenes, however, the situation is legally complicated. To achieve his stated vision for MiamiCoin, Mayor Suarez’s administration will have to navigate a decent amount of red tape.

A gift, not a partnership

To start, there’s no formal partnership between the city of Miami and CityCoins. There is, however, a gift agreement. 

Due to Floridian laws that bar cities from holding bitcoin on their balance sheet, Miami can’t actually access its CityCoins wallet. In fact, it can’t hold the STX at all — it relies on the CityCoins team to do it. 

The city drafted a gift agreement under which the CityCoins protocol transfers amounts from the STX wallet, denominated in US dollars, as a charitable contribution to the city. 

It remains unclear who actually makes the decisions for funds still in the wallet. What's more, it's not even known whether Suarez is the ultimate decision-maker for the wallet’s funds. 

The use of the STX tokens in the wallet is effectively controlled by the CityCoins community since the city is only in charge of the USD sums it receives. 

Meanwhile, Miami is expecting its first contribution “any day now,” according to Michael Sarasti, Miami’s Chief Innovation Officer. It’ll be around $5 million to start, with additional distributions to follow two to four times a year, he said during a recent interview with The Block. 

Once the funds are in hand, the funds have to follow the normal civic process of being apportioned by the Commission, the city’s legislative body. It’s composed of five district commissioners, the mayor, the city attorney, city manager and city attorney. 

The Commission is considering a number of avenues for the city wallet payout, according to Sarasti. Options include affordable housing, investing in clean and climate technology, opportunities to support civic engagement, investments in parks and distributing the funds across the five districts to use as needed. The Commission will ultimately have to agree on wherever the funds should go.

Either way, in Sarasti’s view, the CityCoins project has the potential to push cities to reexamine their relationship with crypto. Already, Miami is having to think critically about how it can access the funds and what laws and regulations help and hinder innovation as it relates to the city’s interactions with crypto.

“It opens up a lot of really interesting questions that I think at some point cities themselves are going to have to engage with more, particularly if you want to have full custody of that wallet,” he said.  

About that dividend…

Meanwhile, Suarez’s purported bitcoin dividend wouldn’t come from these wallet payouts. Rather, it would come from stacking the existing STX in the wallet. By participating in periodic lock-ups, the stacker receives a yield. 

If the city were to stack $15 million worth of its STX, that would produce about $1.5 million in BTC yield, according to Sarasti. Suarez wants to distribute that yield to city residents. 

But it’s not yet clear how that will come to fruition. Sarasti said the details of delivering BTC to residents are still being explored. 

Distributing any bitcoin isn’t under the city’s purview since it can’t custody crypto. It can, however, outfit residents with wallets according to Sarasti, who added that connecting residents with crypto resources is the ultimate goal of the possible dividend. 

“Mechanically, we still have to sort out how it’s going to play out,” said Sarasti.