Detroit says it will soon become the largest U.S. city to accept crypto as a form of payment for city fees and taxes. Starting in 2025, the city will use PayPal to facilitate payments from residents opting to use Bitcoin, Ethereum, and other cryptocurrencies.
A lot of this appears to be a marketing ploy to position Detroit as an innovation hub, according to the city’s announcement, and comes just as President Trump has won a second term in office; he has said he would support a loosening of regulation on crypto.
It doesn’t really make sense for holders of most cryptocurrencies to use them as a form of payment, however—Bitcoin is up 80% in value since the start of the year, so you shouldn’t be selling it. PayPal does have its own stablecoin called PYUSD that’s pegged to the dollar, so you could use that to pay your taxes, but with a market cap of $547 million it’s not incredibly popular.
The City of Detroit’s announcement doesn’t specify which cryptocurrencies will be accepted. PayPal says it currently supports PayPal USD, Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Payments made in crypto will be immediately converted to USD. Detroit is not HODLing.
“The initiative not only makes it easier for Detroit residents to transact with the City but also marks Detroit’s commitment to welcoming blockchain and technology entrepreneurs who want to make a difference in the city,” says the press release. The city also says that the move is being made as part of a broader upgrade to Detroit’s payment services that will make electronic payments easier in general.
Other organizations have tried to piggyback on crypto hype over the years to garner attention. During the memestock craze, AMC began accepting Bitcoin as a form of payment for movie tickets. Again, it’s a bad idea to spend your Bitcoin this way. If you’ll recall, back in 2010 a man in Florida paid 10,000 Bitcoin for two Papa John’s pizzas. The value of those coins today would be over $700 million, and the whole story has become its own holiday in the crypto world.
While Bitcoin is mostly something to hold for speculative gain, stablecoins like PayPal’s PYUSD and USDC are quickly rising in popularity as digital currencies that are actually useful for facilitating transactions online. The largest stablecoin, Tether, has over $122 billion in assets under management. Because stablecoins are pegged one-to-one with the U.S. dollar, payments can be facilitated much faster, sidestepping traditional infrastructure where wire transfers or ACH can take days to process. Stablecoins also make it easy to swap between digital and fiat currencies. If someone paid you in Ethereum, for instance, you could easily swap them for a stablecoin pegged to the dollar so you’re not holding a volatile asset. One downside, however, is that because stablecoins are, you know, a stable currency that lives outside a strong regulatory environment, they are quite popular with foreign scammers conducting pig butchering fraud schemes.
The crypto faithful hope that someday everyone will transact using digital currencies and free themselves from the old banking system with all its regulation and aging infrastructure. They envision a utopian world in which anyone can send money to anyone else instantly, with no arbitrary fees, account freezes, or credit checks.
Certainly, they aren’t wrong that the banking system is in need of modernization. In the internet age, it’s annoying that a transfer takes multiple business days, and sending money to friends abroad can be difficult sometimes because Venmo isn’t supported internationally. But it still feels like we’re a long way off from a crypto take over. This new announcement from Detroit probably won’t move the needle on that much. Transacting in crypto is still complicated, risky, and unintuitive for many, and the aforementioned frustrations with traditional banking are minor. But hey, further acceptance by merchants only helps potentially increase adoption if consumers see they can actually use digital currencies to pay for things.
