Mayor-elect Eric Adams has scored a bit of praise from tech bros — and a bit of scorn from economists — by putting Bitcoin at the top of his agenda in recent weeks.
Adams, who wants to turn New York City into a cryptocurrency hub, has expressed his desire to receive his first paychecks as mayor in bitcoin and to potentially make crypto checks an option for all municipal workers.
Advertisement Discussing his tech dreams, the mayor-elect told a high-powered Brooklyn business conference on Wednesday: “We’re going to turn New York City into a laboratory.”
But crypto is a foggy frontier in the financial world, and Adams will have to reckon with a tangled knot of challenges.Even analysts who have watched Bitcoin closely say the currency, which is technically defined by regulators as a commodity, can be hard to wrap one’s head around.
Advertisement Mayor-elect Eric Adams (Luiz C.Ribeiro/for New York Daily News) “Crypto is a lottery ticket,” said Jeffrey Neuburger, a partner at Proskauer Rose LLP who focuses on cryptocurrencies.“Nobody really knows what’s going to happen, what the future of crypto is.”
Adams, a self-professed computer geek, will face limits in his ability to guide policy around Bitcoin and other cryptocurrencies.
New York State manages BitLicense, the system that businesses use to store and sell virtual currencies, and efforts to increase regulation are growing at the federal level.Currently, New York is considered one of the more challenging states to establish crypto businesses.
“He’ll certainly have a vocal ability to try to influence legislators,” said Gary DeWaal, special counsel at Katten Muchin Rosenman LLP and a former Commodity Futures Trading Commission enforcement lawyer.“But he can’t change the regulatory environment around crypto.”
Publicly traded since 2010, Bitcoin is created by computers through complex math problems.The world’s first and largest cryptocurrency is not widely used for transactions — exchanges are slow — but investors see it as a store of value that could provide protection from rapid inflation.
Bitcoin’s price has enjoyed a breathtaking rise, increasing by more than 200% over the past 12 months.
But it experiences intense volatility, and analysts said its dips make it ill-suited for distribution in paychecks.
This week alone, Bitcoin’s value sank by more than 10%.
Ed Moya, a senior market analyst at Oanda, said Adams was “right to support becoming a hub that benefits from this growing market,” but added that allowing city workers to get paid in Bitcoin would be a “terrible mistake.”
City payroll options seem to preclude Adams from sending crypto into workers’ wallets after he’s sworn in on Jan.1, but he has called for a committee to study virtual currencies.
Volatility isn’t the only concern around Bitcoin.Environmentalists have raised alarm about the amount of electricity used in the creation of bitcoin.(Other cryptocurrencies have smaller footprints.) And experts fret about links between crypto and illicit transactions, and horror stories of scams.
Moya said he’s worried that financial novices who “don’t buy The Wall Street Journal or the Daily News, they just get their news from Facebook,” could get hoodwinked and lose money on virtual currencies.
On Wednesday, Adams spun his crypto commentary as a democratizing force, saying that his Twitter promise to get paid in bitcoin — empty as it may have been — reached young people in the inner city.“They will never again be afraid of the concept of Bitcoin,” he said.
But Paul Krugman, an economist and New York Times columnist who has written that Bitcoin is a “giant bubble,” responded critically to Adams’ post.In a post of his own, Krugman replied: “We’re doomed.”
And Neuburger, who said he’s pleased by Adams’ crypto-friendly message, still noted that some of the mayor-elect’s remarks oversimplify the topic.
“If he’s serious about this, he’ll have to get up to speed on the various issues,” Neuburger said.“Once he’s in office, he’ll have to focus on the details.”.
