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Jean-Paul Rouge
last week
Jean-Paul Rouge
Independent professional

Venezuela is doing it. So is Estonia. And now Berkeley, California, is considering its own government-backed initial coin offering. But this is a different beast from the ICO craze that’s gripped the crypto world in the last year or so, and a far cry from a petro-state’s Hail Mary attempt to save its foundering economy.

Ben Bartlett, a city council member in Berkeley, is after something that is in many ways much more mundane, though potentially far more revolutionary if it works: he wants to use blockchain technology to turn municipal bonds into crypto-assets. In a turn of phrase that is oh-so-Berkeley, he calls the concept an “initial community offering.”

The idea rests on the notion that smart contracts—blockchain-based computer programs that have fueled the rise of ICOs—can securely mediate the buying, selling, and trading of assets, including stocks and bonds. For cities, municipal bonds are a vital means of raising funds for all sorts of projects, like building new schools and hospitals, improving roads, or updating a sewer system. To entice investors, bond issuers will make regular interest payments to bondholders, usually every six months, until the bond matures. The issuer is then obligated to return the bond’s face value to the holder.