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The city has wisely spread around its wagers on an economic future beyond tourism and real estate. Digital currency was just one of them.
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Photographer: Eva Marie Uzcategui
Jonathan Levin
If you want a sense of how far crypto sentiment has fallen, look no further than Miami, which has aspired to be the capital of digital money. Gone are the laser eyes from Mayor Francis Suarez’s Twitter profile; the FTX sponsorship deal for the Miami Heat’s basketball stadium; and the pie-in-the-sky dream of helping fund local government with altcoin proceeds instead of taxes (MiamiCoin, the token at the center of that harebrained fantasy, has plummeted about 99% from its peak.) The change in crypto’s fate from a year ago is as stark in Miami as it is anywhere after Bitcoin lost three-quarters of its value and one of the most iconic crypto exchanges in the world fell headlong into bankruptcy.
But for Miami, it was a bet worth placing. Think of South Florida’s economic development model as resembling a venture capital portfolio. The VC model calls for making a lot of small bets with the understanding that many will fail, but a few winners will bring such exponential growth and extraordinary returns that that they will pay for the losers in spades. For years, the hype men and women in power have taken just such a strategy in the Magic City. Let’s turn the region into Wall Street South! Why not make it into a tropical version of Silicon Valley? How about the capital of crypto? Individually, these ideas all started as long shots, but they had asymmetric upside-to-downside profiles; regional economies and governments never had much to lose in South Florida except perhaps the small hit to county revenue for the time it takes to find a new basketball stadium sponsor.
But Miami is also scoring some enduring victories from this strategy, which are helping it diversify its local job market beyond cyclical real estate and relatively low-paying leisure and hospitality. The Wall Street South gambit, for instance, has paid off in recent years with the arrival of billionaire Ken Griffin’s firms Citadel and Citadel Securities. Blackstone Group Inc. has added hundreds of jobs in the Miami area, while Elliott Management Corp. recently moved to nearby West Palm Beach, developments that are not only big in their own right but will encourage other large firms to do the same.
Certainly, the Miami hype machine has occasionally gotten carried away. Suarez, who has taken regional boosterism to a whole new level, acted recklessly in his decision to associate himself with the highly speculative MiamiCoin, a project based on a blockchain protocol called Stacks. The gimmick — or “innovation” — was that the city would get 30% of the proceeds from bids on blocks of MiamiCoin, not unlike a lottery ticket that partially subsidizes state government.
The City of Miami didn’t create MiamiCoin — it was dreamed up by an organization called CityCoins — but Suarez gave it plenty of airtime, including on his YouTube show “Cafecito Talk,” and encouraged the city to accept the money. MiamiCoin bidders might have thought they were participating in a win-win for themselves and the city, but instead they’ve lost 99 cents on the dollar, and the city basically ended up with some extra pocket change. Suarez’s relentless shilling for Bitcoin looks only slightly better after its 77% drawdown; you wouldn’t expect a government official to use his position of influence to push specific stocks or bonds on voters, and crypto always felt equally inappropriate.
But it’s not as if the crypto winter has turned Miami into some sort of wasteland. Citadel’s Griffin just held an event with Suarez to trumpet his big plans for the region, and the Brickell financial district is bustling as cold weather descends on the rest of the country. Soon, South Florida will bring in huge and well-heeled crowds for Art Basel Miami Beach in December, followed early next year by the Miami International Boat Show and the Food Network South Beach Wine and Food Festival. These flashy events don’t tell the whole story of the area’s economy, but neither will the inevitable images in newspapers in the coming months of empty co-working spaces abandoned by some of the crypto faithful. It’s important to consider the whole picture.
As the Federal Reserve draws the curtain on an era of easy money, it’s clearly possible that some of those classic signs of South Florida’s signature excesses will fade for a while, but the region won’t languish for long. Miami has a well-earned reputation as a boom-and-bust town: It experienced its first bona fide real estate bubble in the 1920s, then crashed hard before the Great Depression. In the 2000s, its skyline reached new heights in the housing bubble, then the real estate market and economy were brought to their knees by the financial crisis. No doubt, a little less whiplash would be a welcome development. But as the graphic above shows, the Miami area has still come out ahead in the long run.
If the US enters another recession or housing slump, Miami will probably follow that pattern and suffer more than the average US city. Yet its development efforts from the latest cycle should cushion the volatility to some degree and ensure that it emerges as a juggernaut in the next upswing. If the world still needs a “crypto capital” after everything shakes out from the FTX debacle, Miami still looks like a decent candidate. But if the industry proves to be a losing bet, that will be fine as well because the city has plenty of other irons in the fire.
