Years after the introduction of bitcoin and blockchain, the technology behind cryptocurrencies is gaining more traction among municipalities around the world interested in bypassing the conventional financial system to pour money into their communities.
Earlier this month, officials in Tel Aviv, the tech startup hub in Israel and the city with one of the highest concentrations of tech startups in the world, announced it will pilot a cryptocurrency project to help local businesses and low-income communities.
By doing so, it became the latest city around the world to announce cryptocurrency-based projects to boost the local economy.
The pilot program began on May 5 and will last for one month, distributing financial rewards to those who make purchases at local businesses through the Colu app. Upon reaching five transactions of about $6 each, users will receive 25 coins in digital city currency, worth about $7. The cryptocurrency can be spent in any of the thousands of local businesses that accept payment within Colu’s Tel Aviv network.
“This way, you support the local business because people buy more from those little businesses, and (part of) every transaction is donated to a social cause,” says Hila Oren, the CEO of the Tel Aviv Foundation, one of the initiators of the project, together with the Municipality of Tel Aviv’s Resilience Unit.
The goal is to help local merchants reach new customers, Oren says. This will primarily boost the small businesses that most need help and in turn help low-income communities. During the pilot period, Colu and the Tel Aviv Foundation will donate about $3 from each transaction to the “Children of Music” project, based at the Lev Yafo Youth Center.
The digital currency project is part of the 100 Resilient Cities program, created in 2013 by the Rockefeller Foundation in the United States.
Tel Aviv is on a list of six cities to pilot a local currency model that uses it for both economic and social purposes. Other cities on the list include Belfast, Northern Ireland; Porto Alegre, Brazil; Milan, Italy; Addis Ababa, Ethiopia; and Cape Town, South Africa.
Tel Aviv began using the virtual currency-reward program during the Eurovision song contest held in the city this month, expecting a boost in consumer spending.
After one month Tel Aviv will publish the results of the initiative and assess whether the project was successful and worthy of being permanently implemented. The ultimate goal is for the cryptocurrency reward program to become a platform to strengthen ties between the municipality and its residents, especially in areas such as public transport and reporting hazards.
Tel Aviv is one of the international cities considered a bitcoin hot spot: San Francisco, New York and several other cities in Europe and Latin America are also on the list. In 2014 Tel Aviv became the first city in the Middle East to have bitcoin ATMs.
Several other cities around the world have dived into digital currency-based projects. Last December Calgary became the first city in Canada to introduce its own cryptocurrency. In March, officials in Innisfil in Ontario, Canada, announced it will allow a pilot program for paying property taxes with bitcoin.
In the U.S., the state of Ohio allows businesses to pay various taxes with bitcoin.
Source U.S. News