Rio de Janeiro to store 1% of treasury reserves in Bitcoin, watershed moment for crypto

 

Rio de Janeiro to store 1% of treasury reserves in Bitcoin, watershed moment for crypto

• The City of Rio de Janeiro has announced that 1% of treasury reserves will be allocated to Bitcoin. 
• In a watershed moment for Bitcoin, the Brazilian city is following Miami's footsteps. 
• Mayor Eduardo Paes revealed that Crypto Rio would be launched soon, alongwith option to pay taxes in Bitcoin.

Another global city followed in the footsteps of Miami, announcing plans to invest 1% of their treasury reserves in Bitcoin. The mayor unveiled plans to collect taxes in Bitcoin. 

Brazilian city prepares to store reserves in Bitcoin

The Brazilian city of Rio de Janeiro has decided to hold 1% of its treasury reserves in Bitcoin. Eduardo Paes, mayor of the Brazilian city, was quoted as saying:

We are going to launch Crypto Rio and invest 1% of the Treasury in cryptocurrency.

According to the mayor, Rio de Janeiro would soon start accepting taxes in Bitcoin. The city has followed in the footsteps of Miami. Mayor of Miami Francis Suarez shared his thoughts on Rio de Janeiro's Bitcoin decision. 

Suarez believes that Rio's connection with Miami is crucial, as both are global cities. The two cities attract international people and businesses; therefore, adopting cryptocurrencies in some form is essential. 

Suarez added that events like the Rio innovation week are crucial to strengthening the Brazilian city's place as a global hub. 

Suarez said:

We created a tsunami of opportunity. Many cities in the United States were raising taxes, and we lowered them. We understood that we could be at the forefront of innovation, and we invited creators here. 

Bitcoin price is above $42,000 as the outlook of investors and traders remains bullish. FXStreet analysts have evaluated the Bitcoin price trend and believe that the asset remains at risk of crashing to $39,000. 

Digital revolution: Will cryptocurrencies take over the world?

 

Digital revolution: Will cryptocurrencies take over the world?

Summary

Stablecoins, which are a category of digital currency, have many favorable characteristics. Payments can be settled essentially instantaneously, and "unbanked" individuals can easily use them. Their supplies are not limited, so potential problems with deflation do not arise with stable coins as they potentially could with limited forms of digital currencies.

Unlike other cryptocurrencies, such as Bitcoin and Ether that exhibit extreme levels of price volatility, the values of stable coins tend to be stable. Many stable coin issuers claim that their tokens are fully "backed" by reserves.

However, assets that can experience their own periods of illiquidity and price dislocation represent a significant proportion of the reserves of some stable coin issuers. If the confidence of investors in the value of their holdings is shaken, the stable coin issuers can experience "runs," much like commercial banks before the advent of deposit insurance and the creation of a robust supervisory and regulatory framework.

If the explosive growth that stable coins have enjoyed in recent years continues in coming years, then periods of financial market volatility could potentially become extreme.

Stablecoin issuers have largely operated in a regulatory vacuum until now. But regulators have become acutely aware of the potential risks that stable coins present, and they are scrambling to catch up. Some federal agencies have recommended that Congress pass legislation that would require stable coin issuers to become insured depository institutions, which would be subject to supervision and regulation by the appropriate regulatory bodies.

Furthermore, private stable coin issuers may soon face competition from central banks that are gearing up to issue their own digital currencies. We will discuss central bank digital currencies (CBDCs) in Part III of this series.