Detroit Allows Payment of Taxes in Bitcoin; It's advisable to reconsider this option.
Detroit declares its intention to become the largest American city embracing crypto as a method for paying city charges and taxes starting in 2025. Based on the city's announcement, the municipal services will utilize PayPal to manage transactions from residents opting for digital currencies like Bitcoin, Ethereum, and others.
This move, seemingly aimed at positioning Detroit as an innovation hub, coincides with President Trump's support for less stringent crypto regulations. However, the practicality of using crypto as a means of payment remains questionable. Considering Bitcoin's 80% price surge since the year's start, it's advisable to keep holding instead of selling it. PayPal's PYUSD, a stablecoin tied to the dollar, may be an alternative, though its relatively low popularity could hinder its broad adoption.
The press release does not specify the precise cryptocurrencies Detroit will accept. PayPal currently supports PayPal USD, Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Transactions made in cryptocurrencies will undergo immediate conversion into USD. Detroit, unlike a HODLer, will not store the crypto.
As per the announcement, the initiative will make transactions more straightforward for Detroit residents and showcase the city's commitment to blockchain and tech entrepreneurs. Additionally, the move will improve Detroit's payment services for better handling electronic payments.
In the past, other organizations have attempted to leverage crypto hype for attention. During the memestock craze, movie theater giant AMC added Bitcoin as a payment option for ticket purchases. Unfortunately, spending crypto in this manner might not be the most lucrative decision. Remember, a man in Florida bought two Papa John's pizzas for 10,000 Bitcoin back in 2010; those coins are now worth over $700 million. This episode has even turned into a holiday celebration in the crypto world.
While Bitcoin is generally regarded as a speculative investment, stablecoins like PayPal's PYUSD and USDC are gaining popularity as digital currencies suited for online transactions. Tether, the largest stablecoin, boasts over $122 billion in assets under management. Being pegged to the dollar, stablecoins allow for quicker transactions, bypassing conventional infrastructure issues such as wire transfers and ACH, which can take days to process. Furthermore, stablecoins facilitate swapping between digital and traditional currencies. For instance, if someone pays you in Ethereum, you can easily swap it for a stablecoin tied to the dollar, avoiding a volatile asset. However, their popularity among foreign scammers conducting pig butchering fraud schemes might be a concern due to their existence outside a robust regulatory framework.
Enthusiasts of crypto hope for a future where everyone relies on digital currencies, leaving behind the banking system, its regulations, and obsolete infrastructure. They envision a world where sending money instantaneously to anyone, with no fees or restrictions, is the norm.
Although banking system modernization is undeniably needed, a shift to crypto appears distant. In the digital age, it's inconvenient when a transfer takes several business days, and international transactions can be challenging due to Venmo's limited availability. However, it seems we're still far from a crypto takeover. This initiative from Detroit may not drastically impact this situation, and transacting in crypto remains complex, risky, and unintuitive for many. When FedNow arrives, it might alleviate some of the minor issues with traditional banking. Nevertheless, increased acceptance by merchants could potentially stimulate crypto usage if consumers see its utility.
This initiative by Detroit to accept cryptocurrencies for city payments signifies their embrace of technology and the tech-driven future. The city's move towards crypto transactions could also incentivize innovative tech startups to establish in Detroit.
With the city utilizing PayPal for managing crypto transactions, the usage of stablecoins like PayPal's PYUSD could gain traction, making digital payments more seamless and practical for Detroit residents.
