Crypto: Miamicoin plummets after Miami Mayor endorsement

Yahoo Finance Live's Akiko Fujita and Brian Cheung discuss Miamicoin losing all of its value after receiving an endorsement from Miami Mayor Francis Suarez.

Video Transcript

BRIAN CHEUNG: We're talking about crypto, and it's not Bitcoin, it's not Ethereum, it's not Terra. We're talking about MiamiCoin, which is plummeting. It's losing nearly all of its value from its September peak. This coming after Miami Mayor Francis Suarez endorsed the cryptocurrency, saying it could one day revolutionize the city's funding. Now, obviously, a pretty lofty ambitious project here. And it's important to note that MiamiCoin is actually not a creation of the city itself. It was actually--

AKIKO FUJITA: City Coin.

BRIAN CHEUNG: --created by City Coin, which is trying to scale the same projects and municipalities around the country. But look, the broad crypto spill is affecting a lot of projects, this being one of them.

AKIKO FUJITA: Well, and I was thinking back to when the mayor was actually on, when he launched this, right? And he said that in the future, this could be something that makes up budget shortfalls. It could be a way to fund the city, that they wanted to be a leader in innovation, which is why they went out and did this. And this is the very risk that we asked him about at the time because we do know that whether it's Bitcoin, or crypto, broadly, it is a volatile asset.

Now, we haven't spoken to the mayor since then. I would argue that he'd probably say that this is just more of a long-term issue. But you mentioned City Coin. New York is also looking at. There's a number of cities that are looking at this, and I wonder to what extent they're likely to reassess, given the recent drop that we've seen, not just in MiamiCoin, but just in general.

BRIAN CHEUNG: Yeah, and I think that broadly speaking, this is a very interesting story from the perspective of, it's been this intersection of local governments and the crypto world trying to intersect at a time when there really isn't a lot of federal, I guess, clarity on how these types of securities need to be treated.

And there was an interesting Axios report that kind of dove into Miami coin, specifically, where there was some correspondence between the people behind City Coin and between the mayor, allegedly, that kind of said, hey, your public communications, like perhaps when he came on our programs and other programs as well, talking about MiamiCoin, where you've got to be very careful about how you talk about this type of stuff, because depending on what you're saying, you could get in some hot water with the regulators, because maybe this is perhaps being billed as more of a security than it really is.

So this is just kind of part of the cautionary tale I feel like a lot of municipalities, but just people in general, need to kind of look at the cryptocurrency world within, which is, look, at the end of the day, across the board, there is still no federal clarity from the SEC over how these types of things need to be treated. And that is a real risk for some of these things going to zero.

AKIKO FUJITA: Well, and it's not just about the MiamiCoin. Miami has allowed city workers to take some of their salary in Bitcoin as well. And we've known Mayor Suarez has been out front, trying to bring more tech companies in. And Bitcoin has been one way. He's tried to say, look, we're out in front innovating. We're ahead of other cities. And so this is, in some ways, has been a recruiting tool for him as well.

BRIAN CHEUNG: Well, I think that's the main point that you make, Akiko. It's really not about MiamiCoin. I don't think people were ever saying, oh, my gosh, MiamiCoin, going to go to the moon, right? Like, everyone's got to get into MiamiCoin. It's really kind of a PR thing for the city to bring in crypto into the jurisdiction. The same story here in New York, right? I mean, Eric Adams, when he was first, oh, I'm going to take my paycheck in Bitcoin, of course, probably going to flip that into Fiat almost immediately, right?

The idea is just to say, hey, we are a good breeding ground for crypto people to come and move to, because it's not Silicon Valley anymore. You see people like FTX setting up in the Bahamas or people moving to Miami or into Puerto Rico. It's, I mean, these are all-- there's a lot of movement in this space. And I feel like maybe that this is just all part of the PR stunt to get people to move there.

AKIKO FUJITA: Well, and also you have to wonder, just, I mean, these are city funds, right? And, you know, yesterday, we were talking about El Salvador, the president there has gone all in on Bitcoin there. He said he bought the dip, too. But is there enough funds there to ride out, whether you want to call it a crypto winter, you want to call it a storm, however you want to frame it? Is there enough there? Because that volatility will continue, you know? And that's the risky part of cities or countries going all in on them.

BRIAN CHEUNG: That's going to be the ultimate backfire for these municipalities that thought it was going to be really cool and sexy to bring crypto people into their jurisdiction because, well, then they could tax the heck out of them and get their capital gains, right? So it comes to the city, but if they all lose their money, then guess what? You're not going to collect all that much. So we'll see if that strategy works out for them.