The Berkeley ICO came one step closer to becoming a reality this week, earning a significant vote of approval from the local city council.

The California city wasn’t the first US locality to push for blockchain adoption, but it’s making up for lost time with innovation. City council officials in the Northern California’s Berkeley on Tuesday unanimously voted for the city manager to explore the perks of using blockchain technology and an “initial community offering” (ICO) to raise funds in lieu of a conventional muni-bond offering.

There aren’t too many firsts in a $3.8 trillion municipal bond market. But if they decide to move forward, Berkeley, would be the maiden city to use blockchain technology in public finance for muni-bond issuance, as Bloomberg pointed out.

The first project on the agenda for what the city considers a pilot program would be a blockchain-fueled $3 million note to raise funds for a new fire engine, as the Bond Buyer reported. The debt instrument would be a way for the city to test the waters for issuing bonds on a public ledger. If it’s successful, affordable housing projects could be next.

Circumventing Wall Street

Berkeley’s Vice Mayor Ben Bartlett told Bloomberg that using the blockchain is the city’s way to circumvent Wall Street. Municipalities often turn to the debt capital markets to issue debt instruments, but Berkeley wants the flexibility to issue bonds that fall below the minimum $5,000 denomination threshold so that more investors will participate. There’s also discussion of investors receiving their interest distributions either in fiat or cryptocurrencies.

Bartlett reportedly wants the blockchain bonds to facilitate denominations between $10 and $25. Lowering the investment threshold makes them less pricey to invest in and would give locals a chance to build their net worth, Bartlett said.

“It’s an exciting course to be expanding the market; and also to be creating new asset classes and opportunities for our people to own new assets, particularly in light of what is happening with creeping poverty,” according to Bartlett in the Bond Buyer.

If members can see past their doubts, bond issuance on the blockchain might be only the first step in an ambitious plan.

Indeed, Berkeley has a vision for tokenized affordable housing involving a muni-bond backed ICO. The liberal city has already partnered with muni-bond market tech startup Neighborly for the initiative.

By using blockchain, the bond issuance plus any related transactions would be recorded on the public ledger. Turning to the blockchain would cut down on the third-party service providers that are required in the bond-issuance process, which would slash expenses for Berkeley.

But while the vote to research the public ledger was unanimous, some council members still had questions, with Councilwoman Susan Wengraf reportedly wondering if using blockchain for micro-muni bond issuance may be “overkill.”

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