Berkeley, California is slowing its roll toward issuing bonds on the blockchain.
This week, the city council asked the city manager to conduct a cost analysis on the benefits of issuing a micro-bond on the blockchain.
That decision Tuesday night, in a unanimous vote during the regular council meeting, means the city is slowing down its efforts to issue such a bond while it further evaluates the concept.
Vice Mayor Ben Bartlett had suggested at a work session two weeks ago that the council consider issuing a seven-year note to pay for a $3 million fire truck using a microbond on the blockchain, but the city could fund something else if it moves ahead with the concept. The council asked City Manager Dee Williams-Ridley to consider items beyond a fire truck that a micro-bond could help fund as it pilots the new concept.
Under the proposal, the shares are like regular municipal bond creation and distribution, but would be done in systems that record to a blockchain, a public, encrypted ledger that keeps track of transactions.
Williams-Ridley was asked to place the concept on her priority list for the second half of 2018, which council members will rank over the next few weeks. The move makes the time frame when the city would move forward on the concept uncertain.
While it is conceivable the council will not move ahead this year, both Mayor Jesse Arreguin and Bartlett said at Tuesday night’s meeting they would give the concept a high ranking on the priority list.
Councilwoman Susan Wengraf called the idea of Berkeley being the first to issue micro bonds on the blockchain exciting, but added she didn't think the council should move forward to quickly with it since there were different levels of comfort with the concepts.
Though the council has been speaking with broker-dealer Neighborly and the UC Berkeley Blockchain Lab and asked an Orrick, Herrington & Sutcliffe public finance attorney to be present at the work session to field questions, it has not decided on a finance team, or blockchain developer and would go through a competitive process before making a decision, according to Bartlett’s office.
A number of vendors have expressed interest in working with the city on the concepts, Bartlett said.
Though at some point in the future, residents could receive interest payments from bonds in a Berkeley digital tokenized voucher system – this concept is being considered separately from the microbond-blockchain proposal. And it wasn’t under consideration at Tuesday night’s meeting.
That would be a stage two concept, according to the vice mayor's office.
The concept under consideration would be to employ the ledger features found in public blockchain projects, but the bonds would be purchased, pay interest and be redeemed in U.S. dollars.
Neighborly has considered the possibility of creating a system where people could purchase or receive bond payments in a cryptocurrency like bitcoin or ethereum, but that has not been a consideration among Berkeley's proposals, according to the vice mayor's office.