Mayor Ken Sim wants Vancouver to become a bitcoin-friendly city, and that could include accepting payments for city services in cryptocurrency.
Sim, who’s an investor in a cryptocurrency exchange, believes investing in bitcoin is the financially responsible thing to do in an age of inflation and market volatility, according to a motion he will introduce at city hall on Dec. 11.
But there are concerns that introducing a bitcoin reserve for the city would bring an even greater risk from volatility.
Sim’s proposal asks staff to research how the city could integrate bitcoin into its financial strategies and whether the city should invest in cryptocurrency by converting “a portion” of Vancouver’s financial reserves.
“It would be irresponsible for the City of Vancouver to not look at the merits of adding bitcoin to the city’s strategic assets to preserve the city’s financial stability,” it reads.
Sim’s ambitions could be stymied by existing laws, which currently don’t allow cities to use bitcoin.
In a statement, a spokesperson for the Ministry of Housing and Municipal Affairs said the province’s Community Charter, as well as the Vancouver Charter, don’t recognize cryptocurrency as payment for “municipal services or other transactions.”
Volatility concerns
Beyond that, the federal government controls the financial framework for the country, says Dan Rohde, assistant professor at the University of Windsor’s faculty of law.
“I don’t even think the provinces would have jurisdiction to, for example, recognize bitcoin as a currency in Canada,” he said.
Rhode also disagrees with Sim’s assertion that introducing bitcoin would be a responsible move, saying it’s highly volatile.
Just because the cryptocurrency has increased significantly in value since its inception 16 years ago, it doesn’t mean it’s appropriate for the city to use, he said.
Rhode described a scenario in which the city accepted bitcoin payments for property taxes that it puts in a reserve. But if it needs that money in 16 weeks or 16 months — not 16 years — the value of the bitcoin may have gone down significantly in that short time, leaving the city short of funds.
“I think it’s extremely risky to frankly have a bitcoin reserve,” he said.
‘Cyclical’ currency
Ethan Lou, the opinion editor of The Globe and Mail’s business section and author of Once a Bitcoin Miner, describes bitcoin as “cyclical” rather than volatile.
An investor himself, Lou said there’s some good rationale for Vancouver to incorporate bitcoin into its financial planning.
“Like many assets into which people put money, over the long term it goes up. The stock market, over the long term, goes up,” he told CBC’s On The Coast.
Lou said there are times when the currency is doing really well, referred to as a bull market, and times when it isn’t — the bear market. If the city finds a way to invest in bitcoin, Lou said, “the question for the mayor might be can he outlast the bear market?”
Sim, who once described bitcoin as “the greatest invention ever in human history” in an interview with cryptocurrency talk show Coin Stories, holds an investment in cryptocurrency exchange Coinbase Global Inc., according to his 2024 financial disclosure. The company offers a platform through which bitcoin can be traded.
In a statement from the City of Vancouver, a spokesperson said the mayor had consulted with both the auditor general and an independent lawyer to “confirm there is no conflict of interest related to his motion.”
CBC News has contacted Sim for an interview but has yet to hear back.
Environmental claim
Beyond the volatility concerns around bitcoin, Rhode also took issue with Sim’s environmental basis for considering using the cryptocurrency.
Written into Sim’s motion is a claim that bitcoin mining has environmental benefits because it consumes “low-cost, excess energy from stranded renewable sources and waste methane, thus reducing emissions.”
Rhode, who read Sim’s motion, said that was “absurd” and “just a straight lie.”
“Consuming energy does not reduce emissions, ever,” he said.
“It completely boggles the mind that a mayor, any elected official, would even put that, frankly, in a motion before a government.”
The environmental impact of bitcoin mining boils down largely to the energy source used in the process. Industry analysts have maintained that clean energy has increased in use in recent years, as concern has grown over the amount of power it requires.
Recent research published by the United Nations University and Earth’s Future journal found that the carbon footprint of 2020-21 bitcoin mining across 76 nations was equivalent to the emissions from burning 84 billion pounds of coal or running 190 natural gas-fired power plants. Coal satisfied the bulk of bitcoin’s electricity demands, at 45 per cent, with hydro making up 16 per cent.