3 days ago
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Detroit says it will soon become the largest U.S. city to accept crypto as a form of payment for city fees and taxes. Starting in 2025, the city will use PayPal to facilitate payments from residents opting to use Bitcoin, Ethereum, and other cryptocurrencies.
A lot of this appears to be a marketing ploy to position Detroit as an innovation hub, according to the city’s announcement. It doesn’t really make sense for holders of most cryptocurrencies to use them as a form of payment anyway—the former is up 80% in value since the start of the year, so you shouldn’t be selling it. PayPal has its own stablecoin called PYUSD that’s pegged to the dollar, so you could potentially use that and not throw money away.
The City of Detroit’s announcement doesn’t specify which cryptocurrencies will be accepted, but presumably, it will allow any that PayPal supports. Payments made in crypto will be immediately converted to USD. Detroit is not HODLing.
“The initiative not only makes it easier for Detroit residents to transact with the City but also marks Detroit’s commitment to welcoming blockchain and technology entrepreneurs who want to make a difference in the city,” says a press release. The city also says that the move is being made as part of a broader upgrade to Detroit’s payment services that will make electronic payments easier.
Other companies have tried to piggyback on crypto hype over the years to garner attention. During the memestock craze, AMC began accepting Bitcoin as a form of payment for movie tickets. Again, it’s a bad idea to spend your Bitcoin this way. If you’ll recall, back in 2010 a man in Florida paid 10,000 Bitcoin for two Papa John’s pizzas. The value of those coins today would be over $700 million, and the whole story has become its own holiday in the crypto world.
Stablecoins like PYUSD and USDC are rising in popularity as digital currencies that can actually be used to facilitate transactions online. The largest stablecoin, Tether, has over $122 billion in assets under management. Because stablecoins are pegged one-to-one with the U.S. dollar, payments can be facilitated much faster, sidestepping traditional infrastructure where wire transfers or ACH can take days to process. Stablecoins also make it easy to swap between digital and fiat currencies. If someone paid you in Ethereum, for instance, you could easily swap them for a stablecoin pegged to the dollar.
The crypto faithful hope that someday everyone will transact using digital currencies and free themselves from the old banking system with all its regulation and aging infrastructure. They envision a utopian world in which anyone can send money to anyone else instantly, with no arbitrary fees, account freezes, or credit checks. Certainly, it’s annoying sometimes when a transfer takes multiple business days, and sending money to friends abroad can be difficult sometimes because Venmo isn’t supported internationally. But it still feels like we’re a long way off from a crypto take over. This new announcement from Detroit probably won’t move the needle on that much. Transacting in crypto is still complicated, risky, and unintuitive for many, and doesn’t solve a huge need. It still feels like an interesting technology searching for a use case.
