In a move to fund its budget deficit, Berkeley city in USA’s California state plans to fund housing projects and other similar projects using crypto tokens. According to Jesse Arreguin, the city’s mayor and Ben Bartlett, a member of the council, municipal bonds will be subdivided into smaller bonds, which will be sold as tokens. This will be part of an ICO (Initial Community Offering) that the city plans to use to serve the interests of its residents. The ICO will be launched in May this year.
What is an ICO?
A city, state, or federal government funds community projects using ICOs. In this case, the initial Community offering is a project by the city of Berkeley that is geared towards helping the city dwellers afford essential services such as housing. The project was launched with the assistance of Neighborly, an investment startup based in San Francisco. In this project, municipal bonds are broken down into smaller units backed by the parent bond.
Why break up the bonds?
Breaking up the bonds will make them affordable to the residents. A bond that has been broken up into micro-bonds is tradable in low denominations. It is also a low risk investment compared to a conventional bond. That is why Berkeley city decided to go this way. It plans to meet its obligations to its residents and with its budget constraints, the only way to do so is to subdivide municipal bonds into units that everyone can afford.
Is that all?
This ICO comes with several advantages. It is a mechanism for shared success and wealth creation. For instance, through it, many residents will afford houses. The city also plans to buy an ambulance using this project. Residents will also buy and sell these micro-bonds through a blockchain. This has the effect of reducing transaction costs much to the benefit of the residents. It also makes the process clear and transparent. This enhances public confidence.
Berkeley is a disciplined borrower
It was easy for Neighborly to agree to be part of this project because of the name that Berkeley has gained for itself. It has a high credit rating on top of its strong financial standing. Hopefully, it will not stain its reputation this time round.
