The proposal, which is set to be debated by Vancouver’s City Council on Wednesday, calls for staff to study the feasibility and potential benefits of holding Bitcoin in the city’s reserves and accepting the digital asset for municipal taxes and fees.
Sim’s motion, titled “Preserving of the City’s Purchasing Power Through Diversification of Financial Reserves – Becoming A Bitcoin Friendly City,” cites a global trend of governments and financial institutions grappling with currency volatility and inflationary pressures. According to the mayor’s proposal, Bitcoin, a 16-year-old cryptocurrency, has built a “solid reputation” and could serve as a hedge against the risks posed by traditional fiat currency systems. He points to other jurisdictions that have embraced cryptocurrencies to varying degrees, including Zug and Lugano in Switzerland, Seoul in South Korea, El Salvador, and several regions in the United States and Africa.
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In addition, Sim contends that holding a portion of the city’s financial reserves in Bitcoin could offer stability and long-term value protection for Vancouver’s taxpayers. He has previously shown openness to digital assets, accepting crypto donations during his 2022 mayoral campaign.
Considerable Skepticism
However, the plan faces considerable skepticism. Critics include local experts and the provincial government, who warn that legal barriers and financial risks complicate the idea. Under current British Columbia legislation, municipalities must invest their reserves in low-risk financial instruments, such as government bonds or guaranteed certificates. Bitcoin’s speculative nature could run afoul of these rules, potentially requiring changes to the Vancouver Charter or other provincial legislation.
Werner Antweiler, a professor of economics at the University of British Columbia’s Sauder School of Business, said the volatility of Bitcoin makes it a risky proposition for a municipal treasury. “The volatility in Bitcoin is in the same league as some of the highest volatility tech stocks,” he said, adding that there is “no guarantee” Bitcoin would preserve or increase in value. Antweiler noted that legislation is designed to protect taxpayers’ money from undue risk, making it unlikely that the province would endorse any move to invest public funds in cryptocurrencies.
The British Columbia Ministry of Municipal Affairs confirmed that municipalities currently cannot hold financial reserves in cryptocurrency. “Local governments in British Columbia aren’t able to hold financial reserves in cryptocurrency,” the ministry said in a statement. “The intent of legislation is that local government funds are not exposed to undue risk.”
Sim’s proposal also includes exploring whether Vancouver could accept Bitcoin payments for municipal services, potentially expanding payment options for residents. Advocates suggest that such integration might encourage digital innovation and economic development while allowing the city to gain firsthand experience in managing and transacting with digital assets.
Still, even supporters caution that any Bitcoin adoption must be undertaken gradually and in a measured fashion. Some suggest starting with a small portion of the city’s reserves or only using it for transaction purposes rather than treating it as a significant investment asset.
If approved, the council would request a full report by the end of the first quarter of 2025, detailing the feasibility, risks, and potential benefits of embracing Bitcoin. For now, Vancouver’s leaders face a fundamental question: can a volatile, emerging asset like Bitcoin play a prudent role in the city’s financial toolkit?
