Tuesday Project Spotlight: the Berkeley Blockchain Microbond

Listen up, local governments! The blockchain for social good movement is not just happening in the private sector. Innovative municipalities are already finding ways to harness the power of blockchain to improve the lives of their residents.

Case in point: the Berkeley Blockchain Microbond. In 2018, officials in the city of Berkeley, California recognized that federal funding for cities was vulnerable to the whims of the political party governing in Washington. City Councilmember Ben Bartlett and Mayor Jesse Arreguín realized that blockchain could be the source of one solution to this problem.

Microbonds are a form of grassroots fundraising, allowing residents a chance to invest in specific projects for their municipalities and receive money back with interest. This type of financing has been used before, such as Denver’s 2014 “Mini-bond” that sold out in one hour.

But Berkeley is the first municipality to use blockchain technology for its microbond project, leveraging blockchain’s transparency and access to allow residents to know exactly where their investment is going. Residents will be able to buy small bonds that will be collectively used to purchase new fire engines for the city.

Berkeley is partnering with Valdes and Moreno to execute the microbond. City Councilmember Ben Bartlett told the BL4SG Center, “Valdes and Moreno have a proven track record for delivering low cost bonds to the public. I’m grateful they are on the job.” Blockchain at Berkeley has also been working with the city to support the development of the project.

By opening up investment access for Berkeley residents, this community finance project will accomplish several goals. First, the Berkeley microbond could bridge the gap between those who are “fluent” in technology and those who are not. Additionally, this pilot project could be used as a model for other cities looking for creative ways to increase municipal fundraising.

Bond financing may not be the most exciting area of law to practice, but this project has the potential to significantly change the way community financing happens. Accordingly, government and public interest lawyers in particular should watch to see how this develops.

The Berkeley microbond project has faced criticism by those argue that the environmental costs of blockchain technology run counter to Berkeley’s commitment to mitigate the effects of climate change. But as blockchain technology becomes more environmentally friendly, it could be used for more projects intended to benefit local governments. Bravo to Berkeley for showing us how it can be done!