Ken Sim’s Bitcoin Push: Visionary Move or Risky Gamble?

Mayor Ken Sim of Vancouver is working to project a tech-forward image, donning T-shirts, using headset microphones, and even keeping an exercise bicycle in his office. His recent push for cryptocurrencies fits perfectly with that image. In December, the ABC-majority council led by Sim passed a motion that directed staff to investigate whether Vancouver could be made a “bitcoin-friendly city”. The investigation would include whether or not things like the city’s tax collection or staff payments could be conducted in Bitcoin and various digital assets, and would potentially include whether the city should invest in bitcoin or other digital assets with some of its surplus funds.

The Symbolic Nature of the Initiative

Though this proposal has created some excitement, it is still mostly symbolic. A real effort to incorporate cryptocurrencies into municipal transactions would require the approval of the provincial government, which appears to be extremely unlikely. Still, with city staff expected to return with a report by the end of the month, and an upcoming byelection on April 5, which may give Sim a stronger majority, this could gain more traction..

Understanding Cryptocurrencies and Their Risks

At their core, cryptocurrencies are digital assets that can be traded and sometimes spent. They are based on complex encryption codes to prevent counterfeiting. But, as a $1.5 billion hack in Dubai—that’s the largest known theft of any kind in history—shows us, crypto exchanges are not free from the risks of hacking.

The Environmental Impact of Crypto Mining

The key problem with cryptocurrency is that it creates negative environmental effects. Crypto tokens are produced through a process called “mining,” which requires immense networks of computers powered day and night to consume significant amounts of electricity. In 2023, global consumption of energy utilized in cryptocurrency mining was about 200 terawatt-hours, approximately the same as total energy consumed by a middle-income country. Cryptocurrency companies may state they use “clean energy,” yet critics argue that the negative effects of crypto companies’ energy use is just greenwashing.

Critically, Sim’s assertion that the energy consumption required for crypto could result in new renewable energy projects in British Columbia is misguided—clean energy projects and initiatives are not constrained by demand for energy, and renewable energy should be used to displace polluting energy sources, not to use more.

The Lack of Intrinsic Value in Cryptocurrencies

Another core challenge associated with cryptocurrencies is their total absence of base value. Unlike real estate, stocks, or even precious metals, crypto has no actual economic purpose. Most crypto holders are speculating and do not spend their crypto at all. The speculation generates extreme price volatility, with crypto consistently swinging dramatically in prices or losing or gaining 50% of value in days. This is because its price is driven simply by investor sentiment, much like a Ponzi scheme, where its sustainability depends solely on new buyers coming in.