Romancing Cryptocurrency in South Florida

The Seafair mega yacht is a 222-foot-long vessel docked by the Hotel Intercontinental that can be rented out for weddings, bar mitzvahs, quinceañeras, corporate conferences and special events.

On July 31, it was chartered for a Bitcoin Rodney “Mastermind” cryptocurrency conference. The event was attended by hundreds of cryptocurrency entrepreneurs who paid as much as $3,500 each to mingle over food and drinks while listening to speakers discuss trading cryptocurrencies like Bitcoin and gaining what was described in marketing materials as the “millionaire mindset.”

But it wasn’t all about lectures and networking. A concert was held on the top deck by none other than rapper, record producer and Miami Gardens native Rick Ross, whose arrival on stage was announced by firing confetti guns while his hype man yelled: “Bitcoin Rodney! What up? Rick Ross is in the building! Make some noise right now for Rick Ross!”

Bitcoin Rodney, aka Rodney Burton, was the event’s main host. Burton, a resident of Maryland, served five years in prison for drug trafficking. Upon his release in 2010, he became a social media star promoting investment in Bitcoin, health products and the occasional celebrity boxing match. Among his assertions is that he turned a $1,000 loan into a few million dollars by investing in Bitcoin, and that he used $350,000 worth of the cryptocurrency to buy a Lamborghini.

Burton also promotes crypto-related finance companies. A past client, the Dubai-based cryptocurrency trading platform USI Tech, turned out to be a Ponzi scheme, according to a May 2019 Engadget article; Burton and other past promoters of the company are referred to as “Ponzi pimps” by online support groups set up by USI Tech’s victims. But Rodney's spokesperson says he was also duped.

The Bitcoin Rodney website currently has a disclosure warning that no one should “buy any crypto currency products unless you are prepared to sustain a total loss of the money you have invested plus any commission or any transaction charges.”

But there was no mention of USI Tech or Ponzi schemes during the Seafair’s voyage. This was Burton’s weekend birthday, after all. Part of the proceeds are reportedly going to a charity to help African American and minority entrepreneurship. As for Bitcoin, passengers that Biscayne Times managed to speak to hailed it as a hedge against a potentially inflated dollar, virtual gold guaranteed to increase in value over time.

“[Bitcoin] is making 700 to 800 people a day millionaires,” proclaimed cruise passenger Alan Hagel, a self-employed “crypto enthusiast” affiliated with Hyper Group who calls himself BaldHeadCryptoGuy on social media. “Take this guy,” Hagel said while turning to a fellow passenger. “When do you want to make a million? One, two, or three years?”

“One year,” the other man replied.

“Put in $100,000 in [bitcoin] and you got $1.2 million at the end of the year,” Hagel advised.

Or, Hagel suggested, invest $1,000 into Bitcoin.

“The $1,000 grows to $10,000 in a year. The $10,000 grows to $100,000 in a year. The $100,000 grows to $1 million in a year,” he exhorted. “Can you wait three years?”

Miami’s Cryptocurrency Champion

The City of Miami was an ideal place for a man calling himself Bitcoin Rodney to launch a three-hour cryptocurrency cruise.

As part of Mayor Francis Suarez’s “How Can I Help?” campaign, Miami is rolling out the welcome mat for venture capitalists and tech companies frustrated by the high-tax structure and bureaucracies of California and New York. Since January, several financial companies that invest in tech and startups have opened offices here, including The Blackstone Group, Founders Fund, Apollo Global Management, Goldman Sachs and Schonfeld Strategic Advisors.

Then on Aug. 24, San Francisco-based Okcoin announced plans to hire 100 Miami-based employees for a new location in Brickell. That makes it the fourth cryptocurrency exchange to announce a Miami presence, after FTX, eToro and Blockchain.com. Okcoin also said it would sponsor Florida’s premier hackathon.

“The City of Miami is delighted to welcome a world-class company like Okcoin, whose dedication to financial inclusivity strongly aligns with our city’s cosmopolitan culture,” said Suarez in a statement, while ignoring requests by Biscayne Times to be interviewed for this story.

But it's clear Suarez has big plans. At the Bitcoin 2021 Conference, the mayor said his goal was to make Miami the global center of crypto trading and mining. His preferred crypto is Bitcoin, the granddaddy of cryptocurrencies that came into existence less than two months after a computer engineer, or engineers, published a white paper on the internet titled “Bitcoin: A Peer-to-Peer Cash System” under the nom de plume of Satoshi Nakamoto, back in 2008.

“For me, this journey of trying to create the Bitcoin, blockchain and mining capital of the world happened long before I uttered the Tweet heard around the world,” Suarez said, referring to his Dec. 4 reply to Founders Fund principal Delian Asparauhov’s Twitter musings about moving Silicon Valley from the San Francisco Bay Area to Miami. Through that Tweet, Suarez claimed he became connected with “key” members of the Bitcoin community who showed him “the transformational importance of my state … leaning into Bitcoin, to make Florida a leading innovator of the world.”

When Suarez stated that Miami was the first city in the nation to publish the “Satoshi White Paper” on its website, his comment drew thunderous applause. So far, his quest has been positively received. It certainly hasn’t hurt his campaign fundraising; his political committee, Miami For Everyone, has raised nearly $4.6 million in funds. Among those kicking in to his reelection effort are businessmen who have bought cryptocurrency, including $250,000 from Social Capital chairman Chamath Palihapitiya, $100,000 from The Raptor Group founder James Pallotta, $100,000 from Facebook originators Cameron and Tyler Winklevoss, $100,000 from Shutterstock founder Jon Oringer, $50,000 from former Google executive Eric Schmidt and $50,000 from Bitcoin investor Mike Komaransky.

A Volatile Market

Suarez’s February attempt to allow municipal employees to be paid in Bitcoin and for the cryptocurrency to be used to pay city fees (which fell somewhat short) inspired Miami-Dade County Commissioner Danielle Cohen Higgins to propose the formation of a county cryptocurrency task force. That task force will examine the possibility of the county accepting cryptocurrency for the payment of taxes and fees. With seven members already appointed, the task force is expected to hold its first meeting this month.

Daniel Stabile, an attorney with Shutts & Bowen LLP’s financial services group and a cryptocurrency task force member, said it’s a good idea for local governments to analyze cryptocurrency as well as blockchain, the algorithm created by Nakamoto to record transactions and prevent Bitcoin forgeries.

“Even our institutional financial services clients at the firm are recognizing that blockchain technology, in one form or another, is likely to pay an increasingly large role in our lives,” said Stabile, who also teaches a course on blockchain technology.

David Schwartz, president and CEO of the Florida International Banking Association, thinks turning Miami into a “hub for innovating fintech,” including ventures involved with crypto, is “a great idea.”

“Why not encourage those businesses to set up shop here?” he asked.

It’s a stance that is somewhat surprising, given that buying Bitcoin is often seen as a hedge against the inflationary monetary policy of central banks. But Schwartz said there’s now “co-existence” between the U.S. dollar and cryptos.

Not everyone is on board with cryptocurrencies, though.

Peter Schiff, a financial commentator and the CEO of Europe Pacific Capital, sees cryptocurrency as a fad at best and a pyramid scheme at worst, and predicted it won’t be around for long. When that bubble bursts, economies based on crypto will be hit hard.

 Justin Wales, a partner with the law firm of K&L Gates who specializes in cryptocurrency, said people should be careful when investing in the product. Still, given the rate of inflation for the U.S. dollar, “it is probably irresponsible to not have any exposure to Bitcoin.”

Local Advances in the Cryptocurrency Game

So far, the cryptocurrency industry has been beneficial to Miami-Dade.

Last June’s Bitcoin 2021 conference was originally slated for Los Angeles but diverted to Miami’s Mana Wynwood Convention Center, due to LA’s COVID-19 restrictions and Suarez’s lobbying.

More than 12,000 people squeezed themselves into the conference hall to listen to Twitter CEO Jack Dorsey, the Winklevoss twins and former congressman Ron Paul speak live, and to witness a video announcement by Nayib Bukele, president of El Salvador, confirming Bitcoin as legal tender in his nation.

The Bitcoin 2022 Conference will be held at the Miami Beach Convention Center to accomodate twice as many attendees or more.

“We’re hopeful it’s Basel-like in that in can breed other events around the city ... and serve as a catalyst for Miami tech,” said Rolando Aedo, chief operation officer of the Greater Miami Convention and Visitors Bureau.

Many tech companies moving to Miami also happen to be crypto-exchange enterprises. The largest is Blockchain, a company with $5.2 billion in assets that will be moving its U.S. headquarters to Brickell. Peter Smith, Blockchain’s CEO, told CoinDesk that he intended to hire 100 people in the Miami area within a year and 300 “over the next several years.” An Israeli crypto-exchange company with $2.5 billion in assets called eToro is also opening an office in Miami. And bitcoin mining company Bit Digital is opening its second U.S. office in Miami Beach.

FTX, with $18 billion in assets, isn’t moving its U.S. headquarters from San Francisco, but its CEO, Sam Bankman-Fried, did announce that he plans to open an office in Miami. Bankman-Fried, who at 29 is the world’s youngest blockchain billionaire, also inked a $135 million, 19-year deal for the naming rights of what was once called the AmericanAirlines Arena; $90 million will flow to the county and be used to fund programs combating gun violence.

And then there are the homegrown companies.

QuickNode, a 4-year-old Sunny Isles Beach-headquartered company that develops blockchain infrastructure, recently received $5.3 million in funding from Reddit co-founder Alexis Ohanian. Bitstop is a Miami-based company that’s placed more than 1,000 Bitcoin ATMs across the nation, including 100 in Florida and 23 between South Miami and Boca Raton.

Andrew Barnard, co-founder of Bitstop and a member of the county’s cryptocurrency task force, said his machines enable people to easily exchange hard cash for Bitcoin in exchange for a 10-15% fee.

“We try to dumb down the process to make the buying more palatable,” he said Barnard, adding that 60% of Bitstop customers are first-time buyers. “The dollar is a great medium of exchange, but not the established long-term vehicle for maintaining or preserving purchasing power.”

Wildly Swinging Values

The thing is, there are more than 10,000 types of cryptocurrencies circulating on the internet. Dozens of so-called “hype coins” are created every day and for as little as $8, reported New York Times writer David Segal in his Aug. 8 article “I Am the Idiot Behind Idiot Coin,” which chronicled how he created his own cryptocurrency over the course of a Zoom call with just a keystroke.

There are around 80 cryptocurrencies with market capitalizations of over $1 billion. Many, including Bitcoin, tend to swing wildly in value. This year the value of a bitcoin (which traded for as little as 8 cents in 2010) reached an all-time high of $63,503.46, according to Yahoo Finance, and then zigzagged on a downward trajectory to a value of $29,807.35 as of July 21. By Aug. 22, less than a couple of hours prior to midnight, a Bitcoin was worth around $50,000, according to CNBC.

Part of what makes bitcoins so valuable is Nakamoto’s rule that only 21 million can ever be in circulation. Right now, around 19 million have been “mined” by independent computer programmers who audit blockchain transactions in exchange for a piece of Bitcoin. (People can trade in fractions of bitcoins, too.)

But Schiff believes the Nakamoto rule has been rendered moot by the tens of thousands of other types of cryptocurrencies that are circulated.

In the meantime, Miami and Miami-Dade County will do their own bit of reflection on cryptocurrency. Although Suarez didn’t get the city commission to agree with his bid to immediately pay out and receive Bitcoin, the legislative body agreed by a 4-1 vote to look into it, and also to create an educational initiative on cryptocurrency. That’s still being discussed among Suarez’s voluntary advisors.

Another question is whether or not to accept more than $1 million from indirect Bitcoin mining. Contrary to media headlines, Miami is not minting its own cryptocurrency called Miami Coin. That’s done by a company called CityCoins, which is offering 30% of the proceeds from its bitcoin-related mining activities to the city. Suarez has endorsed the venture, but his resolution to accept those funds is still being reviewed by the city’s legal and administrative staff, according to an Aug. 9 Miami Herald article.

Alpen Sheth, senior technologist for financial innovation at Mercy Corps Ventures and an informal advisor to Suarez, said Miami is uniquely positioned as a global city to make innovations in financial technology, including microwork programs allowing refugees from Venezuela to earn crypto or using crypto to buy art from dissident Cuban artists. The technology that enables crypto, like blockchain and non-fungible tokens, is also being used to help creators such as writers, photographers and visual artists protect the value of their licensed works.

“The reality is cryptocurrency means a lot of different things for different people,” Sheth said. “It’s expanding financial expression.”