New York City’s Bitcoin Bond Plan Faces Strong Opposition
New York City’s proposal to raise funds through bonds partially backed by Bitcoin has met significant resistance from the city’s financial overseer. Mayor Eric Adams suggested the idea of issuing municipal bonds that would invest a portion of the proceeds in Bitcoin, aiming to tap into cryptocurrency’s growth potential. However, the city’s Comptroller, Brad Lander, has expressed serious concerns about the plan’s legality and financial prudence.
Image 1 Mayor Eric Adams (Source: Bitcoin Magazine)
Concerns Over Stability and Legal Restrictions
Municipal bonds are typically used by cities to borrow money for long-term projects such as infrastructure, schools and public housing. Investors buy these bonds expecting steady returns backed by the city’s financial reliability. The BitBonds proposal differs by allocating about 10 per cent of the funds raised to purchase Bitcoin, with the rest directed to standard city expenses.
The Comptroller stated,
“New York City will not be issuing any Bitcoin-backed bonds on my watch. Mayor Eric Adams may be willing to bet our future on crypto in exchange for a trip to Vegas, but my job is to ensure our City’s financial stability. Cryptocurrencies are not sufficiently stable to finance our City’s infrastructure, affordable housing, or schools. Proposing that New York City should open its capital planning to crypto could expose our City to new risks and erode bond buyers’ trust in in our City.”
The Comptroller’s office has highlighted that cryptocurrencies like Bitcoin are too volatile to serve as a dependable financial base for the city. Given Bitcoin’s frequent price swings, relying on it to finance essential services could expose the city to unpredictable risks. Furthermore, city regulations restrict bond proceeds to funding “capital assets” — tangible or intangible long-term investments that provide benefits over several years. Bitcoin does not qualify under this definition, meaning its inclusion in bond funding may breach existing municipal rules.
On top of this, federal tax laws governing municipal bonds set limits on how the proceeds can be used and on any investment earnings generated from those funds. Since investing in Bitcoin carries significant uncertainty and potential gains, the proposed bonds would likely lose their tax-exempt status. This would diminish their appeal to investors and potentially increase the cost for the city to borrow.
Practical Challenges in Using Bitcoin
Another obstacle is the city’s current financial operations. New York City transacts solely in US dollars and has no infrastructure to accept or convert BTS for payments. This raises questions about how the city would utilise any gains from its Bitcoin holdings in practical terms. Without a system to handle Bitcoin transactions or convert it back into dollars, the city’s ability to spend these funds on public projects remains unclear.
The financial model for investors also introduces complexity. While investors would receive a modest annual interest rate, their returns would be linked partly to Bitcoin’s price movements. Up to a certain point, investors would earn the full increase in BTS’s value, but beyond that, gains would be split with the city. This sharing arrangement adds uncertainty and may deter investors who prefer predictable returns.
Image 2: Mayor-Elect Eric (Source: Forbes)
No Clear Path Forward Yet
Mayor Adams has not yet provided full details on how the BTS-backed bonds would work or how the city would overcome the legal, tax, and operational hurdles. Meanwhile, the Comptroller’s stance makes clear that New York City bonds are traditionally issued to fund long-term, stable projects, not to engage in speculative investment.
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The debate highlights the broader tension between adopting new financial technologies and adhering to established public finance principles. For now, it appears the city will stick to conventional funding methods to safeguard its financial health and maintain investor confidence.
Until significant regulatory and structural changes are made, the introduction of Bitcoin-backed municipal bonds in New York City seems unlikely. The financial oversight office remains committed to protecting taxpayers from undue risk and ensuring the city’s funds are managed with stability and transparency.
