Unpacking Crypto: Why cryptocurrency firms are banking on Miami.

EToro considered a move to Miami long before it announced plans to open an office in the city.

The Israel-based multi-asset investment firm and second-largest Bitcoin exchange on the market began brainstorming locations for a new East Coast office before the Covid-19 pandemic. Miami was a top contender, but the city’s technology ecosystem, while promising, was still nascent, U.S. Managing Director Guy Hirsch said.

Then came the pandemic and Miami Mayor Francis Suarez’s juggernaut campaign to recruit new financial technology businesses and jobs to the city.

Suarez included cryptocurrency businesses in that push, part of his quest to make the city a global hub for the $2 trillion industry and rebrand Miami as one of the fintech capitals of the world. That persuaded eToro to bite the bullet and look for office spaces in the downtown area.

“The [crypto] conferences, the events, the mayor’s office championing crypto as something the city is focused on – all of that tilted the scale toward Miami,” Hirsch said.

EToro isn’t the only crypto business to make the move. For months, companies in the crypto and blockchain space have either relocated their headquarters or established a presence in the Miami area, with most citing Suarez’s enthusiastic support for the sector as a major draw. Case in point: Miami recently became the first U.S. city to launch its own digital currency, MiamiCoin, which aims to earn proceeds to fund city services.

For many in the industry, it was a signal that Florida – and Miami, in particular – could be the next frontier for the fast-growing sector. The influx of new crypto ventures, investors and flagship events seems to confirm that vision, a trend that city leaders hope will result in long-term job gains and cement Miami as a center for cryptocurrency technology and innovation.

How it started

Miami’s status as one of the potential cryptocurrency centers of the world exploded after the Bitcoin 2021 conference in June.

The event brought thousands of cryptocurrency enthusiasts to Wynwood for two days of talks headlined by some of the biggest names in tech, including Twitter founder and CEO Jack Dorsey. The conference relocated to Miami from California, where state and local Covid-19 regulations would have prevented it from proceeding. That wasn’t the case in Florida, where state leaders largely resisted capacity and quarantine restrictions that impacted businesses.

Cryptocurrency leaders took note, said Roberto Valdez, director of cybersecurity automation and risk advisory services at Kaufman Rossin.

“There’s a strong libertarian streak in this sector,” said Valdez, who advises clients on cryptocurrency matters. “If you extrapolate that, there’s going to be a strong affinity for environments that prioritize individual choice.”

What is crypto?

Cryptocurrencies are virtual currencies that do not exist in a physical form. The most well-known example, Bitcoin, was created in 2009 and uses peer-to-peer technology to facilitate instant payments. Its popularity inspired the creation of thousands of other digital currencies, but Bitcoin remains the largest by market capitalization, at about $900 billion.

Cryptocurrencies are stored electronically in the blockchain, a digital ledger that keeps a record of all transactions occurring in a peer-to-peer network. Blockchain technology essentially enables the existence of digital currencies like Bitcoin.

Think of it this way: Cryptocurrency is like the chips purchased at a casino. Outside of the casino, the chips have no purchasing power. The blockchain network, on the other hand, is the casino that provides a secure environment where players can exchange and purchase those chips.

Cryptocurrency is not regulated by a central bank, a major selling point for some advocates. As a result, virtual currencies are not beholden to specific governments and cannot be easily taxed. They can be traded across borders without transaction fees, a cheaper solution for people who often send money to other countries.

Now, cryptocurrency is going mainstream.

Crypto adoption by consumers around the world skyrocketed by 880% over the last year, according to blockchain analysis company Chainalysis. The surge indicates digital currencies are poised to play a larger part in the global financial system in the years to come – and Miami could be at the center of that movement.

Next stop: Miami

Like eToro, cryptocurrency ventures Blockchain.com, Okcoin, Borderless Capital and BlockTower Capital also made moves to Miami in 2021, a trend that accelerated after the Bitcoin conference.

Suarez, a keynote speaker at the conference, is a crypto industry cheerleader. The mayor has been bullish about Bitcoin and its potential to attract emerging technology companies to Miami.

And he’s going all in: Miami’s landmark sports arena, home of the Miami Heat, carries the name of San Francisco-based cryptocurrency exchange FTX following a naming-rights deal secured with Miami-Dade County earlier this year.

Suarez is also a staunch advocate for MiamiCoin. The city partnered with crypto firm CityCoin to debut the token in early August, with the goal of using a portion of the funds generated by MiamiCoin to support city services. So far, MiamiCoin has generated more than $3 million in funds reserved for the city.

Watching Suarez promote the crypto sector has been huge for insiders.

Michael Bucella, a partner at crypto and blockchain investment firm BlockTower Capital, said industry players want to build a brand in a place that treats businesses like collaborators, not adversaries. BlockTower moved its headquarters to the Brickell Financial District from New York City in early 2021.

“Knowing you have support from local leaders to continue to innovate, and not stifle growth, is incredibly important,” he said. “If we’re building our brand in a particular region, we want that region to have the same long-term outlook.”

EToro’s Hirsch described Suarez as the CEO of Miami. He said he couldn’t think of another city with a mayor “even close” to championing the industry to the same extent, which puts Miami at an advantage.

“Miami is very unique in that sense,” he said.

The city has another big advantage: geography.

Cryptocurrency adoption is strong in Latin America, with Venezuela, Argentina, Colombia and Brazil leading the way. Consumers in the region are more likely to use cryptocurrency to protect their wealth from unstable financial markets and inflation, and often use the funds to carry out international money transfers and investments. This year, El Salvador became the first country to accept bitcoin as legal tender; Paraguay could be next.

Crypto businesses want to be close to the action. For that, there’s no better location than Miami.

Opportunities and risks

Many people wonder: Can you actually buy anything locally with cryptocurrency? The answer is yes. But not much.

Inspired by the success of Bitcoin 2021, an increasing number of hotels, nightclubs and condominiums in the area are beginning to accept cryptocurrency payments. Those ventures are still few and far between, but the crypto wave is piquing the interest of entrepreneurs who see it as a way to attract business from a new type of consumer.

“For the first time, people are calling me and asking, ‘How do I accept Bitcoin? What do I do if a client wants to pay with cryptocurrency?’” Kaufman Rossin’s Valdez said.

The state is also interested. In 2019, Florida launched a task force to explore potential applications for blockchain, the technology that makes cryptocurrency possible. Blockchain, which encrypts information into blocks of data that cannot be altered, could eventually be used by governments to share and safeguard information such as voting data or Medicaid records in secure peer-to-peer networks.

“We looked at how Florida could lead the way in using blockchain for government databases,” said Ron Brise, a government affairs attorney with Gunster who serves on the Florida Blockchain Task Force.

Like any budding technology, there are risks. There are still some questions about the security of blockchain networks, and both blockchain and cryptocurrency remain largely unregulated by the federal government.

Some regulators worry that the anonymity provided by cryptocurrencies could make it easier for money launderers to funnel funds from criminal enterprises into legitimate holdings. That’s a particular concern in South Florida, long assumed to be a hot spot for international money laundering.

The currency’s unregulated nature also makes crypto investors targets for online scams.

BlockTower Capital’s Bucella said investors must remember that crypto and blockchain are still earlystage technologies, and with that comes volatility and risks. To be safe, investors shouldn’t drain their savings or devote a significant amount of their net worth to digital currency purchases. Simply put: Don’t invest money you can’t afford to lose.

But that doesn’t mean the technology isn’t worth backing, he added.

“Blockchain and crypto have the potential to touch every industry out there,” Bucella said. “Not taking a
bet on it would be like not taking a bet on the internet in the early ’90s.”