Government operations aren’t a sexy thing.
Most people don’t pay attention to what governments are doing because the day-to-day operations of a bureaucracy aren’t nearly as interesting as the overwhelming amount of news, fake news, social posts, exciting developments and the 24/7 barrage of modern media. As a result, much of the progress being made in governments with blockchain technology and cryptocurrency has gone largely unnoticed, unless you’re focused on the space.
As an example, in March of this year we at Coinberry helped the town of Innisfil, Ontario pull the switch on a project to accept Bitcoin as payment for taxes. We provide the technology in an end-to-end payment system where the town’s residents can now choose to pay their municipal taxes in Bitcoin. Our system converts the Bitcoin – paid into the town’s digital wallet – into Canadian currency and transfer the funds to the town. The net benefit of this project will be significant savings for the town and more money in the public coffers, and that benefits everyone.
For those of us who live in the blockchain and cryptocurrency space, this is revolutionary. It’s the first project of its kind with a Canadian jurisdiction and other jurisdictions are taking note. And now we can see it unfolding in real time.
Widespread adoption is underway. Here’s how and where we go next.
Crypto Made Simple – The Next Immediate Step
In order for widespread adoption to occur, making cryptocurrency simple should be everyone’s goal. Unfortunately when discussing cryptocurrency, too many people get caught in a confusing trap that focuses on the underlying technology – the protocols, the network, the technical details – and not on the product itself.
Part of the problem in our industry stems from the bubble we tend to live in. We speak the same language, but only among ourselves, and we tend to misremember that there’s a huge chunk of society that has no idea what we’re talking about.
An analogy can be made with other types of technology. Ask yourself: how many people have smartphones in the world?
Unsurprisingly, an awful lot do. There are approximately 2.5 billion smartphones in the world today. Now ask yourself how many people understand how their phones really work? How 3G or 5G works, how email works, how SMS gets their messages from their phones to their friends’ phones. How the devices themselves actually work? The answer, of course, is not a lot. It’s a very small number.
Now ask yourself: do people need to understand how the technology behind blockchain, Bitcoin or Ethereum works in order to use it?
Of course not. The principle is the same with cryptocurrency as it is with any technology. You don’t need to understand it in order to take advantage of it.
But because it’s such a game-changer people don’t trust it. They can touch money and feel it with their fingers (even if it’s not cash, because they can still feel bank and credit cards). Cryptocurrency on the other hand has endured a rocky journey in gaining widespread acceptance, in part because it’s not tangible in the same sense that money is tangible. Simplifying understanding is the first step forward in creating widespread adoption and will be the next movement forward with government adoption.
Bottom Line Motivators – It Just Makes (Dollars) and Sense
While it’s easier today to engage people about cryptocurrencies than it was a few years ago, most governments are just starting to consider the underlying business motivators behind leveraging this technology.
It is widely known that governments need to spend money on services and infrastructure. Roads need to be maintained and hospitals need to be funded. This is the underlying driving force behind raising or cutting funds.
Traditionally budget alterations, tax modifications, and bond fundraising options have been the primary methods for adjusting funds. All transactions run through the standard banking system, and the standard large scale accounting service that exist in that government’s country.
It has only been recently that another option has entered the scene – blockchain. As we have noticed, governments are actively seeking to understand and address two main questions – “why should we use this?” and “how might this make sense for us, from a business perspective?”
The low-hanging fruit lies in dealing with large budgets and a massive number of transactions. Even the tiniest jurisdictions are dealing with millions of dollars every year, and, up until now each transaction has had an associated cost. Bank fees as an example, while only a small fraction of a government transaction, add up once many transactions are conducted.
Addressing the questions of “why should we use this?” and “how might this make sense for us, from a business perspective” – become much clearer when governments realize they can remove the middlemen and transaction fees, and add these lost dollars to the bottom line.
As an example, another jurisdiction that Coinberry is working with incurs over $5 million a year in transaction and other bank fees. If we can reduce this by even a few percentage points, when calculated over 5 or 10 years, this translates into huge savings for the city.
Trading Up – Movement to Larger Municipalities
Larger municipalities are taking notes from their smaller, more nimble counterparts. Projects like Innisfil’s won’t go unnoticed and it won’t take long before cities like Toronto, which reaps more than $11 billion a year in tax revenues, realizes just how much they can save by adopting cryptocurrency payments.
We are already seeing interest from municipalities that are far larger than Innisfil – inquiring about the business implications of leveraging blockchain technology for their own jurisdictions.
But movement to larger municipalities will require adjustments in more complicated foundations – adjustments in law. Here’s why.
At the current moment many cryptocurrencies are regarded as securities. In Canada laws prohibit jurisdictions from trading or investing in securities. As a taxpayer, it would be unfair to see your tax dollars invested in a Mayor’s friends company on the stock market for example.
Thus, when cryptocurrency is used as a payment method it is immediately converted into fiat currency. This is how our system works in part with Innisfil. As larger municipalities look to cryptocurrency I do expect that laws will change to better accommodate the ability to hold cryptocurrency.
Once a government is legally allowed to hold cryptocurrency, they can then start paying for other services, contractors, and possibly even employees with the held crypto. While still a little while away from this occurring, this is where mass adoption takes a very large step forward.
What we’re seeing now is only the beginning of that movement.
In 2019 we’re finally seeing the mass adoption of cryptocurrency begin. As cryptocurrency education is simplified, governments start to answer the business focused questions of “why should we use this” and “how might this make sense for us – from a business perspective” we will start to see more governments implement cryptocurrency solutions.
As they do, their successes will become models for larger jurisdictions, which will, at the same time put pressure on the existing laws around holding cryptocurrency.
This cycle – education, business questions, implementation, pressure, legal change – will igniting a rapid and widespread adoption of blockchain and crypto.
The future of cryptocurrency mass adoption is happening, right now, as you read about it here.
Andrei Poliakov is the CEO and Co-Founder of Coinberry, one of Canada’s premier digital currency platforms. His company is the first in Canada to partner with a Government Municipality. With an MBA from the Schulich School of Business, an Engineering degree from the University of Toronto and +10 years of technical implementation and strategic development experience – he helps others understand trends, gain technical insights, and overcome common misunderstandings about the cryptocurrency industry. Andrei believes in pushing the boundaries of the status quo and is passionate about fueling blockchain adoption through education.
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