Innisfil, a town in Ontario with a population of 36,000, has approved a pilot project which will allow residents and local businesses to pay their property taxes in bitcoin. The new payment option will come into effect next month, according to a statement.
Compared to credit cards Innisfil says paying property taxes using bitcoin will be cheaper. This is because the processing fee will be 0.5% compared to credit cards which charge an average of 1.75%. Innisfil has partnered with Canadian fintech firm Coinberry Pay in this effort.
Per Innisfil’s Mayor Lynn Dollin, the move is an indication that the town is ‘truly a future-ready and innovative community’. A staff report by the town says as much:
The demand for this service in Innisfil is unclear at this time; however, innovative solutions and concepts are quickly becoming our identifying feature in attracting and retaining progressive entrepreneurs and professionals to our community.
While Innisfil is claiming to be Canada’s first municipality to accept bitcoin, no cryptocurrency will be held in its name. Once a user pays the property tax in bitcoin, the amount will be immediately converted to Canadian dollars by Coinberry. It will then be deposited into an Innisfil bank account.
In some quarters this has been criticized as a publicity stunt. Last year Ohio announced taxes could be paid in bitcoin but the state would not hold any cryptocurrency.
Financial publication Barron’s suggested this was merely politicians seeking attention:
So this seems to be a case of a politician seeing the hype that gets attached to Bitcoin-anything and deciding he would like some of it for himself.
With the new payment option, residents and businesses of Innisfil could end up paying more than envisaged. Innisfil has warned users that value fluctuations while awaiting confirmation will be the customer’s responsibility:
For example, if a user sent 1 Bitcoin to pay for their taxes at 12:01 am when the rate to sell Bitcoin on the Coinberry platform was $5,000 CAD/Bitcoin but the 4th confirmation on the blockchain took place at 12:40 am and by that time the rate to sell Bitcoin on the Coinberry platform had changed to $4,950 CAD/Bitcoin, Coinberry would be responsible to remit to Innisfil $4,950 CAD and the user (taxpayer) would be responsible for the remaining $50 to satisfy their tax account obligation.
The flipside is that users will be owed by the town if the price of bitcoin appreciates.
Perhaps aware that residents and businesses might be turned off from paying property taxes in bitcoin following the QuadrigaCX crypto exchange saga where $190 million may potentially be lost after the CEO suddenly died, Innisfil went to great lengths to reassure its customers regarding the integrity of the bitcoin payments processor it has partnered with.
For instance, the staff report mentions that Coinberry only uses multi-signature cold storage wallets. Additionally, Innisfil also saw it fit to state that Coinberry has a business continuity plan ‘if anything happens to the CEO’!