Richmond Hill second Canadian city to accept cryptocurrency for property tax payment

'In Richmond Hill, the only reason you want to buy into Bitcoin is the same reason you want buy into stock.'

Yorkregion.com
August 13, 2019
Sheila Wang

Richmond Hill residents are expected to be able to pay property taxes in Bitcoin as an alternative payment method in 2020.

City staff will hold discussions in the coming weeks to enter into an agreement with Coinberry Limited, a Toronto-based digital crypto platform, enabling residents and businesses to pay with Bitcoin and convert it to Canadian dollars before transferring it to the city.

It will make Richmond Hill the second Canadian city to offer the payment option after Innisfil, which approved a one-year cryptocurrency pilot project earlier in March.

There wasn’t a time frame for offering the service in Richmond Hill.

“For Richmond Hill residents, it means they have another option to pay their property taxes. It increases our service without any risk or cost to the city,” wrote Deputy Mayor Joe DiPaola, who put forward the motion at a council meeting July 9.

Currently, the city accepts property tax through online payments via banks, cash and cheques in person or by mail, according to a staff report.

The report recommended the use of cryptocurrencies as an alternative form of tax payment on the grounds digital tokens can be transferred at a lower cost than conventional currency transfers.

As an emerging form of virtual currency, the cryptocurrency runs on a blockchain, a decentralized system, and is exchangeable directly between two users without any central authority outside of traditional banks.

“For what purpose is the city adding such payment option when there is no evidence whatsoever to support this new service?” asked Coun. Godwin Chan, the lone vote against the motion.

Chan has spoken strongly against allowing Bitcoin payment since the idea was first brought up earlier this summer.

He said he's concerned about the volatile nature of the nascent cryptocurrency industry, which may result in delayed payment of property tax.

While it holds a clear advantage of low transaction cost, the digital currency’s value fluctuates subject to the supply and demand in the market as well as a number of other factors.

“The value will go up and down just like a stock does. However, instead of going up and down a few dollars, it can go up and down thousands of dollars,” said Dave D’Silva, who founded Bitcoin North, a York Region community organization for blockchain education and innovation.

Only in the last month or two has the cryptocurrency market started to stabilize, D’Silva said.

But the market doesn’t necessarily pose a risk to the municipalities that accept Bitcoin as a payment method, he added.

“The city is not on the hook,” D’Silva said, noting customers who pay in Bitcoin are responsible for making up on any shortfalls if the price changes during the transaction process.

The city won't hold any Bitcoin, eliminating the risk of tax implications and value fluctuation, he said.

A Bitcoin was valued at around $15,500 as of Aug. 8.

The city’s spokesperson, Libbi Hood, said Coinberry will “immediately convert the digital currency to Canadian dollars, limiting value fluctuation” when a payment is made with Bitcoin.

“I, more than anything else, was surprised by how this was identified as a priority for the council,” said resident Ramin Faraji who works as the process improvement manager at George Brown College.

Faraji was among many who were flabbergasted by council's move and reached out to The Liberal after a previous article was published July 11.

He said the property tax payment method has never been a major concern among residents, citing a 2019 community survey that listed most important issues in Richmond Hill.

Faraji, who works with emerging technologies and digital transformation, was among the candidates running for a regional and local councillor seat last October.

He raised a number of questions:

“How was this identified as an opportunity? Is there a sound business case supporting the recommendation to adopt this payment method? What are the true costs and risks, and, most importantly, who is benefiting from this arrangement?”

Deputy Mayor Carmine Perrelli said he started looking into the cryptocurrency payment option following requests by some residents, but he wasn't aware of any company in the city currently dealing in Bitcoin.

He said there's no cost or risk associated with the new payment method.

“This is the future, right?” Perrelli said. “It’s no different than going to your financial institution converting your euros or your liras or pounds into Canadian currency.”

Created in 2009, Bitcoin is the first and most well-known type of cryptocurrency that can be used to buy merchandise anonymously and pay internationally in an easy and cheap way.

While Bitcoin is often used as a way to avoid currency deflation in some countries like Venezuela, D’Silva said that in Canada, the digital coin is getting popular for very different reasons.

“In Richmond Hill, the only reason you want to buy into Bitcoin is the same reason you want buy into stock. Investment,” he said, and predicted the overall value will continue to rise.

However, the anonymous digital currency also has a negative reputation as it has been used for fraud and other nefarious purposes. The crypto industry is currently unregulated in Canada.

“Criminal organizations involved with money laundering, drug trafficking, prostitution, tax evasion and terrorism favour an untraceable financial transaction mechanism,” Faraji pointed out.

Coun. Chan also questioned the way the city decided on Coinberry without undertaking any procurement to seek more options.

The Toronto-based company currently provides crypto exchange service for Innisfil.

Acknowledging the risks associated with trading Bitcoin, D’Silva said it's important to find a reliable crypto exchange that's unlikely to disappear overnight.

And, it’s not for everyone.

“The type of customers who would pay in Bitcoin should only be the sophisticated Bitcoin holders. It’s not for amateurs. It’s for those who understand it,” D’Silva said.

D’Silva applauded the decision to accept cryptocurrencies.

“By Richmond Hill accepting Bitcoin, they become a magnet for blockchain developers because it’s a symbol for a modern city,” he said.

But Faraji said there are other efforts that should come first before jumping into cutting-edge technologies.

“If we are serious about attracting high-tech and clean industries, we need to focus on more fundamental issues across the region, such as our IT infrastructure, suitable workspace, and a transit system that allows our highly educated and skilled workforce to access such opportunities,” Faraji said.