Mayor Eric Adams has compared the rise of cryptocurrency to the life-cycle of the Amazon rainforest.
“When you look at the floor of the rainforest, you see the death of the trees, the vines, and others that become fertilizers for the new growth that takes place,” he said in an interview with Gothamist. “The fear people are having around crypto is that they think it’s the death of how you do business or how you do commerce.”
But in fact, he predicted that the demise of old practices will pave the way for a “future commerce.”
“That,” he added, “is the transformation.”
New York City mayors have traditionally pursued pet economic development projects. But few in recent memory have been as buzzy and polarizing as crypto — a decentralized banking system based on digital currencies. The $2 trillion global industry has invaded Wall Street, rankled environmentalists and spurred regulatory concerns over a potential speculative bubble. Crypto firms have in recent months exerted more political influence, ramping up their lobbying efforts at the state and federal level.
Although the industry is regulated by the state, players have also poured support to Adams, who raised at least $200,000 from donors engaged in crypto activity between 2018 and 2021, according to a Gothamist analysis of his campaign filings. The dozens of donors include billionaire hedge funder-turned-crypto enthusiast Daniel Loeb, Mets owner Steve Cohen, and investors Cameron and Tyler Winklevoss, the twin brothers of Facebook fame.
Indeed, since taking office, Adams has raised his clout as one of the crypto industry’s leading political influencers. He has followed through on a campaign promise of having his first three paychecks converted into Bitcoin and Ethereum – two types of popular but volatile cryptocurrencies. He has touted the potential of blockchain — a public database that can reliably store and track documents — to end deed fraud. And as the city’s second Black mayor who grew up working class, he has latched onto crypto’s promise of being the great financial equalizer.
The fear people are having around crypto is that they think it’s the death of how you do business or how you do commerce.
Adams has an outsized platform to promote crypto as mayor of the country’s biggest city, but experts say it amounts to little more than cheerleading since the industry is state-regulated.
Depending on who you ask, the mayor’s belief in crypto is either foolish hype or brilliant branding.
“It fits the persona he’s trying to create,” said Hank Sheinkopf, a veteran political consultant. “He is the mayor of new versus old, of swagger versus complacency.”
Skeptics of the industry warn that the tech sector in general has pushed the boundaries of legal and ethical behavior. Crypto has already spawned cautionary stories. The firm OneCoin, for instance, stole $4 billion from investors, becoming the most infamous crypto ponzi scheme to date.
“I think that you do have a Wild West attitude that's very contemptuous generally of government-regulating authorities and even of democracy,” said John Kaehny, the executive director of Reinvent Albany, a good government group, who cited Uber as an example. The ride-hailing company engaged in a nearly decade-long battle against the city’s regulatory attempts before recently agreeing to list yellow taxis in its app.
“One of the claims of crypto is that somehow it puts you beyond the reach of the government,” he added. “That's not really great advertising for good civic behavior.”
I think that you do have a Wild West attitude that's very contemptuous generally of government-regulating authorities and even of democracy.
Earlier this month, Adams raised eyebrows when he attended a crypto conference in Miami. The one-day visit — funded by city taxpayers and included the self-professed vegan enjoying a dinner at a steakhouse — came during a churn of crime-focused headlines at home.
Speaking with Gothamist, Adams defended the timing of the conference, saying that it had been planned in advance and that traveling across the country to explore new economic opportunities for the city is a critical part of his job. He added that he entrusts the day-to-day management of the city to his agency heads.
“This is the right thing for me to do,” he said.
The trouble with crypto
Adams’ boosterism for crypto comes at a moment when Democrats are divided over how to approach a fast-growing sector that has won more acceptance among pro-business Republicans.
Critics, led by U.S. Sen. Elizabeth Warren of Massachusetts, have warned that the industry is vulnerable to fraud and called out the massive energy required by most blockchains to verify the transactions — a process known as crypto mining that awards digital currency to those that perform verifications.
At the local level, Jumaane Williams, the city’s public advocate who is running as a progressive candidate for governor, has said crypto’s energy consumption runs counter to the state and city’s goal to reduce carbon emissions as a result of mining.
He has called on Gov. Kathy Hochul to place a moratorium on crypto mining.
In New York’s Finger Lakes region, environmentalists have spent more than a year protesting a natural gas plant that powers a bitcoin mining operation with nearly 20,000 computers.
“Why New York wants to allow this type of mining to continue is very sad to see,” Williams said in an interview.
Adams has acknowledged the environmental concerns and said he opposes crypto mining in New York, which may only wind up diverting the activity to less green-conscious parts of the country and globe. Crypto defenders have said the industry will transition to green or less energy intensive sources over time. Ethereum, one of the currencies owned by the mayor, is scheduled to upgrade to a more energy-efficient system sometime in the first half of this year.
Crypto’s progressive appeal
A self-described computer geek, Adams speaks about crypto in terms of both innovation and social equity. On the latter, he appears poised to draw support from some progressive Democrats.
The technology has been cast as a pathway for disadvantaged communities to build wealth. Unlike traditional banking, crypto eschews vetting mechanisms like credit checks that have locked out poorer people of color. Critics say that while that may be true, the volatility of digital currencies make them a risky bet for those with the least to lose.
Today, investors consist of predominantly white men, but surveys show an increasing participation among Blacks and Latinos.
U.S. Rep. Ritchie Torres, who represents impoverished sections of the Bronx, recently argued that blockchain technology — apart from digital currencies — may usher in a new kind of financial transactions system that could benefit low-income communities of color with lower fees.
“The traditional financial system is highly intermediated, far more than people realize,” he said in an interview with Gothamist. “And each of those intermediaries are engaging in rent seeking that comes at a cost to consumers.”
Despite his environmental concerns, Williams said he was seeking to learn more about crypto and how to broaden access to the technology.
“From what I understand, this is a legitimate currency that's going to be here,” he said. “And so I do want to do some more research about what that means for marginalized communities. Because right now, they are wholesale left out of this and that's a problem.”
The next frontier?
Matthew Fraser, who Adams recently tapped as the city’s chief technology officer, spoke enthusiastically about the promise of crypto in municipal government. Among the ideas are using blockchain to replace the city’s property database; allowing people to settle their taxes or summonses in cryptocurrencies; and an internal currency that the city can use to incentivize certain types of desired spending like healthy food consumption.
Kaehny and others have called any replacement of the dollar currency far-fetched.
Fraser likened the concept to something familiar to visitors at Disney World, which created its own type of currency called “Disney Dollars.”
“If you bought with Disney Dollars, you got savings based on where you spent it and what you spent it on,” he said. “Layering on crypto and then looking at the scale of the city, it's certainly something that's possible.”
Still, he cautioned that the administration’s near-term technology focus is on “bridging the areas where government has been critically deficient.”
That means continuing to expand broadband service in low-income neighborhoods and delivering on the mayor’s campaign promise of establishing a single online portal that enables New York City residents to access all of their entitled benefits and services.
But in the short-term, the mayor has set his crypto sights on education policy. Shortly after being elected, he vowed to create a curriculum on crypto for public school children. He told Gothamist the classes could begin as early as this summer and added that the city would develop introductory courses by partnering with industry leaders.
“What has happened is that people have been left behind and we don't want that mistake made now in this brand new technology,” he said. “So we’re going to build out a real pipeline.”
How some of these policy ideas play out may depend on the regulatory environment, which is facing a concerted lobbying effort at the federal and state level by the crypto industry. In February, Bloomberg reported that more than a dozen crypto firms were spending a total of $1.5 million to lobby Albany lawmakers, who determine the regulations for the industry.
New York is considered to be among the toughest states for crypto companies to operate in. It was the first state to create a so-called “BitLicense,” which is required for companies trading in virtual currencies, also known as Bitcoin exchanges.
Torres has urged state regulators to revise its “cumbersome” rules around the BitLicense.
Since the application process began in 2015, the state has altogether issued 30 BitLicenses, a number that Torres and other crypto advocates say reflects a bureaucratic stranglehold on the booming sector.
Kaehny, of Reinvent Albany, argued the state has rightly mounted a rigorous vetting process for a new industry dogged by suspicions of fraud and money laundering.
“Financial firms are massively regulated by the SEC, why do crypto promoters think crypto is somehow different or superior and deserves less scrutiny?” he said, referring to the Securities Exchange Commission, the federal agency which regulates the securities market.
But regulatory changes appear to be on the horizon. Crypto players see a potential ally in Adrienne Harris, a former adviser on financial tech under the Obama administration who Hochul picked to head the state’s Department of Financial Services. The agency is responsible for issuing BitLicenses.
“It's not always going to be fast enough for crypto companies, who move at light speed,” Chris Coffey, a political strategist at Tusk Strategies, which recently launched a crypto practice. “But on the flip side, it's a regulatory-first environment here, and when you have your license here, it's a really big deal.”
Reached for comment, Madia Coleman, a spokesperson for the governor, said the state was still speaking with “stakeholders and legislators“ on the issue of cryptocurrency regulations.
“As the State evaluates the safety and soundness of all new cryptocurrency proposals, we will make decisions accordingly,” she said.
Describing the licensing process as “discriminatory,” Adams said he believed the governor was seeking to “sort of streamline the process, but doing this a very safe way so that we can do away with any type of fraud.”
“I really commend her for not sitting on the sidelines,” the mayor added. “We must be leading in this new form of commerce.”
David Cruz contributed reporting.