New York lawmakers say payments should be a public infrastructure, and blockchain could lay the foundation

Governments provide public infrastructure: roads, water, sanitation services, public transportation, things that keep a community moving. A proposal in the New York State Senate and Assembly asserts that a payment system should also fall under public infrastructure, with a plan for a blockchain-based digital payments platform that can provide liquidity for tax credits, cut out middlemen for the unbanked and open the door to compensating unpaid community volunteers.

A public Venmo

The Integrated Value Ledger (IVL) is the brainchild of Cornell law professor and policy advisor Robert Hockett and New York Assemblyman Ron Kim. They call it a kind of public Venmo, in which New Yorkers would be outfitted with wallets, where the state’s more than $50 billion in tax credits would be available with the opportunity to engage in peer-to-peer transfers as well as converting the tax credits to cash. This, they said, mitigates problems for the unbanked. 

“Everybody has the functional equivalent of a bank account,” said Hockett. “It's just a digital bank account.”

But the problems for the unbanked extend further than not having a place to keep their money. Receiving tax credits in the form of checks requires those without a bank account to utilize payday lenders or check cashing companies, which take a percentage when they liquidate the checks. In other words, IVL renders such entities obsolete, and Hockett and Kim claim it would inject more wealth into local communities. It also eliminates any fees that users might have to pay when utilizing private payment structures.

To put it simply, Hockett and Kim’s plan aims to lower transaction costs for users so that more wealth will change hands and be generated in communities, particularly lower income communities. Hockett said it’s a scandal this type of infrastructure doesn’t already exist in a society that purports to be commercial and an economy based on exchange.

“If we're going to be that kind of an economy or that kind of a society, a kind of payments architecture amounts to a sort of a central public infrastructure just as much as roads and bridges do,” he said.

Hockett said the plan is so far agnostic on opening up the public wallets and payment system to other cryptocurrencies, and would be wary of actors leveraging it for speculative purposes. The payment platform would transfer digital dollars, mitigating the need to understand the mechanisms behind tokens.

Additionally, Kim said the payment system could also utilize a card, similar to how certain public benefits are already linked to cards. It would unify these benefits under one card linked to the payment system, making the benefits even more liquid.

Spreading the news

As with any new system, education is a concern. The unbanked will remain unbanked if they don’t understand how to use the infrastructure. While Kim said he was encouraged by how many members of his district already leverage digital payment platforms, he still has an eye on how to disseminate information on a possible public digital payments platform. For now, he is speaking with community members in his district, looking for the right community partners and planning a speaking tour at higher education institutions in the city, like the city college system.

Be a part of it

The plan has yet to identify a particular blockchain that the IVL is built on. Hockett said down the line they plan to contract that work out, similar to what the state does with other infrastructure projects. After speaking with technologists, Kim said he’s confident the system can be built quickly. The tech is there, and can be implemented rapidly, according to Kim.

“It's not that hard to create a public payment platform architecture to execute this, it's just a matter of whether we have a political will,” he said.

The time for a change in infrastructure is now, according to Kim, particularly because of previous economic policy on the federal and state level.

“We're at the tail end of decades of core policies that have created so much wealth disparity in our community and wealth income disparities., so many of our communities are cash strapped and to a point where for the last 10, 15 years many who are in middle class, low income communities think that credit is real money,” said Kim. 

New York, New York

While Hockett and Kim have plans to take the IVL framework to the federal level at some point, they said New York is the place to begin, with the idea that other states may follow suit. 

“We were kind of excited about starting in New York because New York has oftentimes been a kind of proving ground for cool ideas that then ended up being taken to the federal level,” said Hockett.

He pointed to the New Deal era as a moment in which economic policies began in New York before moving to D.C.

Still, New York has been stringent with the digital payments world, implementing measures like the Bitlicense and keeping a watchful regulatory eye on crypto industry compliance. Kim said this may not be the case for a state-run payments system. Local currencies with government oversight aimed at adding wealth into communities already exist in the state. In the Hudson Valley, many local business owners use Currents to supplement their business.

Compensating care

Hockett and Kim also see the IVL as a way to generate wealth for the so-called “care economy,” which includes uncompensated labor that stimulates the economy indirectly, like volunteer tutoring or caregiving. If comprehensive studies were done that showed certain types of care had quantifiable effects, compensation could be given via the IVL.

“We'd have to develop modes of verification to make sure people aren't scamming where they claim to be doing it, but at least now the infrastructure is there to begin to do something like that, to begin to experiment in effect with rewarding care work in the form of what amounts to a kind of defacto complementary currency,” said Hockett. 

For now, the proposal is awaiting further movement after being introduced in the State Assembly by Kim and the State Senate by N.Y. Sen. Julia Salazar, who Kim said is particularly interested in the framework's care economy capabilities.