Ken Sim’s Bitcoin Boosterism Is on the Ballot

Vancouver Mayor Ken Sim carefully cultivates a tech-bro image: T-shirts, headset mics and an exercise bike at work. His current cheerleading for cryptocurrencies is very much on-brand.

In December, Sim’s ABC majority passed a motion at city council instructing city staff to study making Vancouver a “bitcoin-friendly city.” They are investigating whether municipal transactions (like collecting taxes or paying city staff) could be conducted in bitcoin and other digital tokens. They’re even exploring whether the city’s financial reserves should be invested in crypto.

So far Sim’s crypto crusade is purely symbolic. Vancouver would need legislative approval from the provincial government to try anything like this — far-fetched from any provincial government, let alone from David Eby’s.

But staff have been instructed to report back by the end of this month. And if the April 5 byelection cements Sim’s ABC majority on council, there’s no telling where he’ll go with it. Voters should think long and hard before giving Sim a mandate to spend any real money on this risky gimmick.

Cryptocurrencies are digital tokens that can be traded or (in rare cases) used to purchase actual goods and services. They are based on complex computer codes that theoretically prevent counterfeiting. However, hackers have had significant success breaking into crypto exchanges — including a recent $1.5-billion heist in Dubai dubbed the “largest known theft of any kind in all time.”

Crypto the climate cooker

Crypto tokens are digitally created through a so-called “mining” process: vast banks of computers running 24 hours per day, in processing centres around the world connected through blockchain systems. This allows the tokens to be traded confidentially, without government oversight.

This mining uses incredible amounts of electricity: close to 200 terawatt hours last year globally, equivalent to the total power consumption of a medium-sized country. Sensitive to their growing reputation as polluters, crypto firms pledge to adopt cleaner sources of energy, but that’s greenwashing.

Sim’s motion even claimed crypto’s hunger for power would foster new renewable energy projects in B.C. This logic is upside down: clean energy projects are not held back by lack of power demand. And renewables should replace polluting forms of energy, not pave the way for brand new, dubious consumption.

The crypto industry, without doubt, is the most economically useless source of new carbon pollution on the planet.

The vast majority of crypto holders have no intention of buying stuff with it. They use crypto purely for speculation: hoping to buy low, sell high (or vice versa, if they are short sellers) and pocket the difference.

But unlike other speculative assets (precious metals, real estate, fine art or company stocks), crypto has no fundamental economic value whatsoever. Even tulip bulbs (which sparked one of the first great speculative manias in the 17th century) have some real underlying value: they make a garden beautiful.

Crypto coins, in contrast, are just pointlessly complicated arrays of zeros and ones, with no real use to humans at all. That’s why their price can never be stable — and in the long run, as people come to appreciate this fundamental uselessness, that price will tend toward zero.

Scams, money hiding and wild swings

The only people who use crypto as actual money (to buy and sell goods and services) are those hiding from the prying eyes of government: criminals and tax evaders. So while Sim says going all in on crypto will cement Vancouver’s reputation as a technology centre, think again. In practice, it might reinforce another, less savoury dimension of Vancouver’s international brand: a global centre for money laundering and financial scams (through casinos, real estate flips and stock market scams). RCMP documents confirm an epidemic of Canadian cases of crypto-based theft and fraud.

Crypto was invented in the 2000s, associated from the outset with right-wing, libertarian politics. Advocates claim these coins break free from government control over the creation and regulation of money.

The ABC motion embodied this libertarian pedigree, arguing that through crypto Vancouver would “guard against the volatility, debasement and inflationary pressures of traditional currencies.” In fact, the debasement risk is very much on the other side of the coin. Crypto valuations always swing wildly, because they depend entirely on the collective, unstable faith of other investors. Like a Ponzi scheme, they have value only so long as others believe they have value — and keep buying.

So bitcoin and other tokens routinely gain or lose 50 per cent or more in value within days or weeks, as the herd instincts of investors alternate wildly between greed and fear. Pouring city reserves into this circus is a recipe for bankruptcy, not fiscal resilience.

Crypto has lurched from crisis to crisis in recent years, rocked by hacks and thefts, corporate collapses (like the $10-billion collapse of FTX) and regulatory crackdowns that targeted crypto brokers for ignoring standard securities rules.

But the industry has been given a new lease on life by Donald Trump, who wooed crypto adherents (and harvested big donations) during the 2024 U.S. election. Trump pledged to fire Gary Gensler, then-head of the U.S. Securities Exchange Commission, or SEC, on “Day 1” of his administration. Gensler had launched several investigations into shady crypto practices.

Crypto’s support for Trump is now paying off in spades. Gensler resigned before Trump could fire him (on the day of Trump’s inauguration). Trump nominated crypto-friendly Paul Atkins to replace him. Even before Atkins’ confirmation, the SEC has already abandoned multiple investigations into crypto scams.

Best of all for the crypto bros, Trump is creating a massive “strategic bitcoin reserve” to hold crypto tokens. In theory, this is supposed to be an analogue to the Strategic Petroleum Reserve: stabilizing the price of a volatile commodity in the face of unpredictable shocks.

But oil, unlike crypto, has an actual economic function. Why should government care about stabilizing the price of a speculative asset with no real economic purpose? It might just as well create a strategic reserve for baseball cards.

Trump’s corrupt crypto ties

The true motive for Trump’s strategic reserve is to reassure, and eventually bail out, industry insiders who have trillions at risk in an inflated speculative bubble. As Nobel economist Paul Krugman puts it, Trump’s reserve will “yield... huge profits for a few big players and huge losses for both taxpayers and low-information investors.”

Indeed, Trump and many allies are profiting personally from his shilling for crypto, direct from the White House. Just before his inauguration, Trump launched a personal crypto coin, called $Trump. It collected $15 billion in initial sales, but its value quickly collapsed (now down 85 per cent from peak). Insiders who sold out early made big profits, as did the brokers who made commissions on the frenetic trading (including a brokerage owned by Trump). This glaring conflict of interest hardly raises an eyebrow in today’s Washington swamp.

In both substance and image, Mayor Sim’s crypto flirtation very much channels Trump’s approach. With Trumpian hyperbole, Sim calls crypto “the greatest invention ever in human history.”

Like Trump, Sim has personal investments in a major crypto exchange, Coinbase Global.

And Sim wields an iron hand over his own caucus, expelling an unreliable ally, cracking the whip just as Trump silences once-independent-minded Republicans in Congress.

The City of Vancouver’s endorsement would merely add fuel to the fire of this volatile, environmentally destructive and fundamentally useless financial fad. But if the April 5 byelection cements Sim’s power, his quixotic, risky vision of a crypto city would come one step closer to reality.