The news: The rural Kentucky town with an openly gay mayor that fell under the national spotlight after appearing on Comedy Central's The Colbert Report has decided to accept its police chief's request to be paid in the digital currency bitcoin rather than fiat money.
The township of Vicco city commission approved Police Chief Tony Vaughn's request after reviewing its feasibility, concluding that there didn't seem to be any legal or logistical obstacles with paying Vaughn in the requested format.
"We done a checkup on it, and that's the way he wants paid, and that's the way the city is going to pay him," said City Commissioner Claude Branson. Vaughn's paycheck will be deducted of all applicable state and local taxes before being converted into bitcoin, which will then be deposited into his private account.
This is probably the first time in the history of the country that a city government has decided to begin paying an employee in digital currency. Vicco also made headlines earlier this year by passing an anti-gay discrimination ban, a feat which landed it in the Colbert Report:
The Colbert Report
Vaughn can be seen in the video discussing his relationship to openly gay Mayor Johnny Cummings, saying "I know he’s gay, and he’s my best friend. We've been accused of being lovers. He's been through all four of my marriages. That boy knows more about me than most people in my life, and I love him like a brother, and I'll take care of him just like that, just like a brother."
Is this a smart move on Vaughn's part, though? Unclear. Because bitcoin is nowhere near stable, Vaughn's really asking to be paid in a volatile commodity rather than actual currency.
Bitcoin peaked at a value of $1,240 just days ago before crashing to a morning low of $870 on Thursday — a 30% crash based on warnings from China to financial institutions not to accept the currency.
As bitcoin surges in value, passing the $1,000 mark in November, a lot of people are getting wary that bitcoin's history of massive price fluctuations and meteoric rise indicates that much of the rise in prices is "pure, rampant speculation — a signal for serious investors to steer clear of it."
The former president of the Dutch Central Brank, Nout Wellink, commented recently that "This is worse than the tulip mania. At least then you got a tulip [at the end], now you get nothing."
If bitcoin does fade out or is diluted by competing cyber-currencies, he could stand to lose a lot of money. But if bitcoin's advantages turn out to be more than just speculative mania, he could stand to make astronomic amounts of money. Bitcoin has rallied from even severe crashes before, and whether or not this is a good way to get your wages really depends on what the long-term stable price of bitcoins will be — if there ever is one.