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When the price of the pioneering crypt, bitcoin, grew from less than $ 1,000 to nearly $ 20,000 by the end of 2017, the Texas state regulators became nervous.
"Every time new markets for investments develop or new types of products are advertised on the front page, white criminals and scam artists will benefit," says Joe Rotunda, executive director for the Texas State Securities Board. "We wanted to see if bad actors were trying to exploit the hype to defraud investors."
Some jurisdictions are trying to issue their digital currencies as a way to raise funds for municipal projects
In a 30-day tour, Mr. Rotunda has opened 32 inquiries on lousy offers of cryptocurrency titles. Now the office has more than 100 cases.
If the rise of a new type of money has opened a temporary window for scammers, it has also created a number of new opportunities for state and local government. In the United States, municipal authorities and state agencies have taken measures to embrace and manage the phenomenon of cryptocurrency.
Encouraging adoption: pay taxes with crypts in Ohio
Governments have worked to create new rules and regulations around emerging digital money platforms. Some have encouraged adoption, others have tried to set limits around encrypted funds.
Ohio has recently become the first US state to declare that it would accept payments via the digital currency. "We are doing it to give Ohioians more options and ease in paying their taxes," Treasurer Josh Mandel said announcing the move. He noted that the real-time monitoring of the blockchain would make it harder for bad actors to interfere with tax payments made through cryptocurrency.
Experts say it makes sense that governments explore the use of cryptocurrency for taxes, as well as welfare subsidies and other financial interactions between the state and its citizens.
"As a programmable form of money, it creates a digital identity that is both convenient and secure and that can be used to pay for goods and services without having to give up confidential information," says Joel Telpner, a member of Research institute Blockchain.
Local improvements: funding of municipal projects in the United States
Some jurisdictions have taken a further step forward and are trying to issue their digital currencies as a means of raising funds for municipal projects.
The city of Berkeley, California, for example, is developing a pilot project through which it intends to issue its own cryptocurrency so that investors buy municipal bonds to finance social efforts, including affordable housing and homeless shelters.
"The 3.7 trillion dollar muni market lacks transparency, involves a large number of intermediaries collecting commissions and excluding small investors," said council member Ben Bartlett in proposing the scheme. "By combining civic crowdfunding with municipal microbunds, we can democratize public funding in Berkeley and create tangible benefits for our community."
In the parish of Lafayette, in Louisiana, the mayor-president Joel Robideaux is following a similar path. He proposed launching a government cryptocurrency as an alternative means of financing public infrastructure.
More than just a source of financing, cryptocurrency is a booming business. Some state and local governments are trying to portray themselves in a crypto-friendly light in the hope of attracting emerging cryptography-based businesses.
Wyoming, for example, aggressively courts encrypted businesses, approving blockchain-friendly laws with the support of a local defense group, the Wyoming Blockchain Coalition.
Blockchain can "cut costs, streamline administrative processes and stimulate new businesses in Wyoming," said executive director David A. Pope, announcing the formation of the coalition. The group pushed for the laws, which make it easy to conduct business on blockchain, to build an environment that is friendly to the corporate uses of cryptocurrencies.
Crypto perils: taxing miners for power in New York State
Although some US states are moving to embrace new digital money, however, others are facing a series of perceived dangers associated with the increase in cryptocurrencies.
Some point to the absolute technical complexity of cryptocurrency as a possible red flag for the state and local government.
"Once you manage your financial platform, there are security issues, there is potential interference from hackers, so you have to have software that aligns with other systems globally," says Shone Anstey, executive president. of the intelligence analysis company Blockchain Intelligence Group. "Can a city government manage an entire bank from a basement server? It's hard to do what Visa does."
Some governments are already facing unexpected negative repercussions from the increase in the crypt. In New York State, for example, multiple jurisdictions have joined together to place limits on cryptocurrency, the practice of earning digital money by validating online transactions.
Mining takes a huge amount of electricity, so much so that the New York State Public Services Commission recently decided to allow service companies to charge a higher rate for crypto-mining companies to keep the rates of local utilities sky-high.
The New York Municipal Power Agency (NYMPA), an association of 36 municipal authorities, called for change. Mining activities "were increasing costs for all NYMPA members and their taxpayers, without providing any benefit to the community," says the group.
Hiring experts: appointment of a head of state crypt in Florida
Florida, meanwhile, is trying to avoid potential complications by assuming a head of state crypto, an observer in the field of moves states that other states should also consider.
"This is an extremely complex industry," says Aaron Lasher, a board member of the bitcoin BRD portfolio provider. "To really understand it at a fundamental level, you need experience in economics, in monetary theory, and you must also be a software engineer to understand how all cryptography and validation works."
Despite these complications, and even in the face of widespread initial fraud, Mr. Rotunda, an officer in the Texas armed forces, predicts that states will find a way to make long-term cryptocurrencies.
"The public is really interested in this and we have an obligation to protect those investors," he concludes. "With the development of legitimate markets, things will tend to stabilize".
