It seems more and more entities and institutions are creating their own forms of digital currency. Kodak launched KodakCoins, according to Bloomberg. Bitcoin reports that Russia is considering launching a crypto-ruble. And now, Berkeley might become the first U.S. city to formulate its own currency that will be used to buy municipal bonds.

Per CityLab, Berkeley City Council member Ben Bartlett and Berkeley mayor Jesse Arreguín are working with the UC Berkeley Blockchain Lab and municipal finance group Neighborly to create a blockchain technology that will eventually lead to an initial coin offering, or ICO.

Courtesy of Bitcoin

The motivation behind the city’s foray into blockchain? The city’s concern that, after tax breaks approved by the Trump administration, Berkeley won’t have enough funds to fight the adverse effects of rising real estate costs. The budget of the U.S. Department of Housing and Urban Development was decreased, and funding for Section 8 housing credits was also cut. 

“Essentially, we would like to explore some new ways of financing because we have terrific needs,” Bartlett told CityLab. “And we are concerned about our ability to fulfill our moral and legal obligations for our residents here.” 

Berkeley currently has a median rate of $3,000, according to RentCafe, and the median home price surpassed $1 million back in 2015, now reaching above $1.2 million in Downtown Berkeley.

Unlike other cryptocurrencies, the primary purpose of the digital currency envisioned by Bartlett isn’t trading (although that could very well happen eventually). “These coins will actually represent a real security issued for a specific purpose,” Kiran Jain, COO of Neighborly, told CityLab. “In this case, municipal bonds for affordable housing or homelessness.”

The current issuance process for municipal bonds is paper-based and complex. The hope is that by moving the process into the digital world, the city can encourage Berkeleyites to make an investment in social impact movements. 

“It’s not a speculation tool,” Bartlett told CityLab. “It’s like a non-profit, special purpose vehicle, meant to fund social good.” It’s also backed by a real asset: social impact.

While cryptocurrency may seem exciting, it’s not the most reliable form of currency. Bitcoin’s value has been volatile, increasing from $1 to $19,000 over the course of 2017, only to shoot down to $800 in February. 

Berkeley will be the first city to conduct an experiment of this kind using blockchain, but city officials seem happy to be the guinea pigs, although they recognize there are still many unanswered questions. The cryptocurrency doesn’t have a name, and officials don’t know whether people outside of Berkeley will be able to spend the city’s coins. But Bartlett is optimistic that Berkeley is paving the way for other cities to follow suit. 

“This municipal coin, this token, whatever you want to call it,” said Bartlett to CityLab. “It’s meant to… hopefully produce a really demonstrable new paradigm of shared prosperity.”

Berkeley may become the first city to launch its own digital currency, but many other U.S. cities have seen the effects of cryptocurrency on their real estate. A Miami condo listing made news headlines in 2017 when the owner listed Bitcoin as the only form of currency they would accept as payment. Los Angeles is a city that has already been deemed bitcoin-friendly, as there are many neighborhoods teeming with businesses that already accept bitcoin.