The city of Berkeley, California, is considering an unconventional fundraising scheme: an initial coin offering.
That might sound silly and ill-advised. ICOs and cryptocurrencies have garnered a reputation in recent months for scamming investors via hype, false promises, and downright weird gimmicks.
But city leaders say the technology behind the ongoing cryptocurrency craze may help Berkeley house the homeless and fund other worthy public projects. “We have to embrace the spirit of innovation if we are going to turn a corner on all these pressing problems like the water shortage, the housing shortage,” Berkeley city council member Ben Bartlett told PCMag.
On Wednesday, city leaders announced a partnership with a San Francisco tech firm called Neighborly and the University of California, Berkeley’s Blockchain Lab to study the project. But unlike other initial coin offerings, the local government is essentially trying to digitally tokenize a municipal bond from the city, and offer it up for sale.
What this might look like is still up in the air. But cities often issue municipal bonds as a way to quickly generate funding for public projects like schools and bridges. However, these bonds are generally offered through banks and mutual funds, saddling individual investors with high transaction costs to obtain them.
The Berkeley initiative intends to streamline the whole process. By issuing a potential ICO that uses blockchain technology, anyone online can securely invest in the bond. Or so goes the thinking. But one idea is to also make the tokens from the ICO useable in local Berkeley restaurants and shops. Homeless residents could be given the tokens as vouchers to buy goods or pay rent, Bartlett said.
The push to explore an ICO comes as city leaders worry that federal funding may dry up. President Trump has threatened to cut funding to sanctuary cities like Berkeley that try to protect undocumented immigrants from deportation.
“We are hoping to create a new funding resource in the face of federal retrenchment,” Bartlett said. “We have over 1,000 homeless people and we are not going to accept an inability to house them.”
The potential ICO will build on the work from Neighborly, a tech firm that’s been applying crowdfunding practices to the municipal bond market. The company’s site acts as an investment platform to buy municipal bonds from local governments across country. Last year, it connected over $100 million to public projects in the US.
“Making bonds more accessible and reducing costs involved with issuing the bond are among the target outcomes,” for the Berkeley project, Neighborly CEO Jase Wilson said in an email.
Project partners plan on presenting their proposal to the Berkeley city council this spring, Bartlett said.