While the city of Zug, Switzerland, begins testing bitcoin payments, municipalities in the U.S. still see bitcoin as high risk with little reward. They’ve had the option to accept bitcoin for city services for four years thanks to a forward-thinking Ohio company. Yet, not one has updated their online payment methods.
Municipal Software with Bitcoin Integration is a Thing
Citizen service provider E-Gov Link, which announced bitcoin integration in March 2013 (mere weeks after FinCEN released its first guidance), has yet to onboard a single bitcoin-accepting municipality. Not one.
The company, which is the only major provider of municipal software integrating bitcoin payments, has fielded only “a handful of calls from municipalities that specifically expressed interest,” according to CEO and founder Jerry Felix. E-Gov Link allows individuals to pay utility bills, parking fines, registrations for class, and a litany of city services online.
When the Cincinnati company started accepting the digital currency, bitcoin had a market value of approximately $95 per bitcoin and a market capitalization of more than one billion. The price of Bitcoin currently is $920, and the market capitalization approximately $16 billion.
E-Gov Link’s core clients include municipalities of 5,000-70,000 inhabitants in more than 60% of US states, believes there are several reasons why not one municipality in the US has experimented with bitcoin.
“Municipal government is by nature conservative,” reasons Mr. Felix, who bought E-Gov Link. “[Representatives] are entrusted with the public’s money and they don’t want to mess it up. That is where they get yelled at at public meetings, voted out of office or administrators get fired. Municipal representatives like some innovation, but don’t want to go too far out on a limb. Bitcoin is perceived as high risk, low reward, and citizens aren’t asking for it.” Why might a local government begin accepting bitcoin?
U.S. Municipalities Don’t Need to Innovate
“The main reason a municipality would accept bitcoin is to show they were innovators,” Mr. Felix surmises, which echoes statements made by Zug’s mayor regarding its bitcoin experiment. “But, government doesn’t have that motivation. Whereas private businesses compete with each other, governments are not competing to show they are cutting edge. There is some resistance also due to the generation of people running government.”
Some in government have shown interest, Mr. Felix assures, like one communications director in a certain Ohio municipality, who couldn’t convince his finance department to accept bitcoin.
“What we have been doing is informing officials about bitcoin, and the fact that though there is volatility, they don’t need to hold bitcoin,” Mr. Felix says, whose platform allows clients to accept bitcoin via payment processors BitPay or Coinbase.
Nikhil Chand, a consultant on the Cleveland Heights bitcoin boulevard project in Ohio, knows a thing or two about working with regulators. He saw first hand how Ohio Department of Public Safety forbade Ohioans from paying for beer, wine, or liquor with bitcoin.
“Regulators aren’t going to devote time to something that seems irrelevant or off the radar,” Mr. Chand told Bitcoin.com. “Many in the Bitcoin community hope regulators stay far, far away from it, actually. Small businesses which require regulatory licensing to operate, like as a liquor store, aren’t going to take the risk in interpreting current law. They want explicit guidance.”
He adds: “If regulators are slow to respond, the financial industry will do what it usually does – calculate if the potential profitability of deploying a blockchain solution is higher than any potential fines or jail time, and execute accordingly.”
Bitcoin is ‘Best in Class’
“We are progressive enough to stay on top of the leading technologies,” Mr. Felix said. “We’re not sitting back on old technologies. We provide what are called ‘best in class solutions’, whether we build them or license them from other providers. When we are building websites for people, we use the leading content management system, WordPress. We integrated bitcoin because it’s the market leading digital currency, and it still is.”
Mr. Felix adds: “I think local governments want to be second to implement bitcoin payments, but are hesitant to be first. Especially when it comes to money and accountability to citizens.”
With Zug having announced its bitcoin testing, now could be time for a US municipality (say, in Silicon Valley) to do the same.
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Images courtesy of Shutterstock, E-Gov Link and BitcoinBoulevard.us.
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US Municipalities Hesistant on Bitcoin