Berkeley Could Become the First US City to Allow Investments on the Blockchain

Berkeley, California has a long history of ahead on social movements. The city’s latest idea would capitalize — literally — on the wild popularity of blockchain technology by using it to raise funds for public projects. The plan would essential allow people to make city investments on the blockchain.

According to MIT Technology Reviewthe idea comes from Berkeley city council member Ben Bartlett, who wants to create an “initial community offering” that would allow investors to purchase municipal bonds secured by a blockchain-based, smart-contract system.

Municipal bonds work much like other bonds — in practical terms, you loan the bond issuer a chunk of money in the form of a bond, and the issuer then pays you interest until the bond matures and you get back the money you loaned. In this case, your loan would go towards projects like building schools or updating city infrastructure.

Bartlett wants to change the current system for issuing municipal bonds, which is already a $3.8 trillion market, Bloomberg reports. Yet these bonds have become so expensive to issue (thanks to an array of banking middlemen) that they’re useless for anything but the largest of city projects.

Bloomberg reports that the opportunity to make investments on the blockchain would be better for investors, who would get their stake in municipal bonds without markups from middlemen. It would also be better for cities, which wouldn’t need lawyers, advisers, and standardized documents usually needed to mediate the bond’s sale — all of that would be replaced by digital smart contracts…

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