Latin America is no stranger to working with cryptocurrencies. Last year El Salvador became the first nation to adapt Bitcoin as a legal tender. High inflation rates combined with unstable governments make Latin America a top contender to be the first amongst adapting Bitcoin. It was announced this week that Rio de Janeiro will be putting Bitcoin on their balance sheet.
As Brazil’s second largest city, it’s estimated that they will allocate roughly 1% of their treasury to crypto. The announcement confirms a 2022 prediction from Fidelity Digital Asset researchers: that more governments and central banks will acquire digital assets. It comes down to keeping up appearances and staying on top of new innovations, they said.
“We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers,” Fidelity Digital Asset researchers wrote in a report published on Jan. 6, 2022.
Other cities and sovereign states are going to have to start thinking ahead if they want to maintain an edge, even if the value proposition of cryptocurrencies is not immediately clear, researchers said.
“While Rio de Janeiro is a city, and technically the mayor mentioned cryptocurrency, not bitcoin specifically, we see the overall game theory as the same,” said Chris Kuiper, head of research at Fidelity Digital Assets. “In other words, entities are viewing bitcoin acquisition now as a small insurance premium to pay.”
Paes also mentioned plans to offer citizens who pay property taxes (known in Brazil as IPTU) in bitcoins a discount, according to a report from the Brazilian newspaper O Globo.
Long-time cryptocurrency fan Miami Mayor Francis Suarez also spoke at the Rio Innovation Week summit where Paes made the announcement. Suarez is looking to allocate a portion of Miami’s treasury to digital assets, he said last year. So far Miami has become a top tech hub after Mayor Suarez and his business friendly policies has lured many founder, especially from Silicon Valley.
A question one could ask is whether this could lead to more FOMO. Do you think this will lead to more cities and eventually nations adopting it? Time will only tell and whether this will benefit the people of Rio is another thing to keep an eye on. It’s good to remember that we’re still in the early days and one can only assume where politicians will take this.