Analysis

Why Miami Is Generating Major Fintech Buzz

By Elise Hansen
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Law360 (May 17, 2021, 6:03 PM EDT) -- Encouraged by a cryptocurrency-friendly mayor, Miami is generating considerable buzz as a burgeoning technology hub, and local attorneys who work with startups and financial technology companies say they're fielding a lot of phone calls.

Mayor Francis Suarez has been aiming to bring technology startups and investors to Miami, and he's been particularly bullish on Bitcoin. Southern Florida has seen a string of high-profile arrivals over the last year, including the likes of Peter Thiel's Founders Fund, billionaire activist investor Carl Icahn's Icahn Enterprises, and Blackstone, which is working to open a technology office in downtown Miami.

It's not clear whether Suarez's Bitcoin proposals will come to fruition, or how permanent a tech migration to Miami could ultimately be. But entrepreneurs and investors are paying attention to the recent spike in interest, attorneys said. Here, Law360 takes a look at some of the reasons Miami could flourish as a fintech hub, as well as what challenges still remain.

A Growing Network

Southern Florida has an existing startup scene as well as plenty of draws for new arrivals — the area has sunshine and no state income tax, local academic institutions supplying engineering talent, and, as Velvel Freedman of Roche Freedman LLP noted, an "efficient and excellent" court system.

The city also serves as a gateway to Latin American markets, said Sean Burstyn, a solo practitioner at Burstyn Law Firm PLLC.

"It's Little Cuba," said Burstyn, who is Cuban-American. "[Cubans] turned the city into a startup city in the pre-tech era, and that 'immigrant story' energy has never left. What we're seeing now is the overlap of that energy with technology."

While much of the evidence for a tech migration is anecdotal, there seems to be no shortage of stories. Many attribute the recent interest at least in part to Florida's COVID-19 response.

Burstyn, who initially set up shop in New York, said his young firm "used to get calls every couple days from startups asking me to help them incorporate and raise money in [Manhattan neighborhoods] SoHo or Chelsea," Bursytn said. "When COVID-19 started, that was almost completely replaced by the same clientele asking me to help them get started in Miami."

Tim Shields, a Kelley Kronenberg partner in Fort Lauderdale, agreed that looser restrictions during the past year have been appealing to individuals and to businesses alike.

"Florida's COVID-19 response has driven several tech companies I know that were based in the Northeast to Florida because they were more open," Shields said. "Regardless of political persuasion, people would rather be able to go out and eat out dinner than not."

The influx of capital and entrepreneurs could provide a crucial accelerant to Miami's startup scene. Shawn Amuial, a Miami-based associate at Holland & Knight LLP who focuses on commercial real estate and blockchain, said he can see Miami developing into the sort of startup scene that's present in Austin, Texas, or that's incubating in Nashville, Tennessee.

"We were missing for a long time a very strong network of tech startup entrepreneurs and the venture capitalists that invested in those startups," Amuial said. "It would have taken a long time for South Florida to catch up without COVID-19, but because of COVID-19 those entire networks from Silicon Valley and to a certain extent from New York City as well just picked up and came here."

"Whether it's temporary or permanent I think is to be determined, but it jump-started the ecosystem," he added.

An Openness to Crypto

Miami has seen particular attention from cryptocurrency enthusiasts. Mayor Suarez has been vocal about his interest in Bitcoin especially, and in February the city passed a resolution to create a cryptocurrency task force that will look into accepting Bitcoin as payment for city fees.

Suarez has also called for an exploration into allowing municipal employees to be paid in Bitcoin. And he's expressed a desire to invest city funds in the cryptocurrency.

"I think it's an exciting step," Shields said.

He added that "In some ways it's symbolic more than practical because of the limited amount of people that might partake [in that option]." But the mayor's advocacy could nevertheless earn goodwill in the industry and perhaps some additional business, Shields said.

"When the governor and the mayor of the city and the mayor of the county are all in on recruiting tech companies and saying, 'Hey, we're open for business,' a lot of people are making individual choices to end up down here," he said.

Remaining Challenges

There are still plenty of complications, though. For example, the state's financial regulators could step in if Miami is deemed to be investing in a volatile asset, Shields noted, and municipal employees could face a complicated tax bill with questions about capital gains taxes if part of their paychecks are in Bitcoin.

Many of those issues arise because it's still fairly rare to accept payment in cryptocurrency, Shields said. Instead, digital assets typically have to be converted into U.S. dollars first. 

"At the end of the day, that's where all the complexity comes in: It's in the conversion [to U.S. dollars]," Shields said. "If you can get part of your pay in cryptocurrency and then pay someone in cryptocurrency, that ultimately is going to be the future."

There's also uncertainty about how well the city's schools and housing supply could absorb an influx of new residents, not to mention how those new residents will feel about the weather in, say, July, Amuial said. Whether arrivals will stay — or stay full-time — remains an open question.

For those who use the area as a seasonal destination, the stays could be longer than a brief stint during the winter, he said.

"I think a lot of the folks who have the flexibility and have already purchased a home here will come down here for a prolonged period of time, relative to what they were doing before," Amuial said.

Law Firm Response

Lawyers say they're buckling up for an influx of work associated with the Miami buzz. Kyle Roche of Roche Freedman, which has offices in New York City and Miami, said the latter city is likely to see deal growth followed by an uptick in litigation. 

"I'd expect to continue seeing exponential growth in the deal space, and as that grows, we'll continue seeing an increase in litigation connected to those deals," Roche told Law360 over email. "There's typically a delay between deals and litigation, but we've already started seeing an increase in litigation related to startups and crypto companies in the court systems."

Burstyn also said that in addition to his New York presence, he's just opened up shop in Miami in a bid to work with migrating startups.

And Quinn Emanuel Urquhart & Sullivan LLP announced on May 10 that it's opening a Miami outpost with none other than Suarez, the mayor, as of counsel. The firm has also recently opened offices in Austin and Atlanta — two other cities with a vibrant and growing tech presence — and said the developments in Miami made the move an "obvious step," citing the burgeoning technology and financial presence in the city and the attendant opportunities for commercial litigation and intellectual property work.

Shields called the current moment a "perfect confluence of factors" for Miami's startup scene.

"I don't see it slowing down anytime soon," he said.

--Additional reporting by Matt Perez. Editing by Alanna Weissman.

For a reprint of this article, please contact reprints@law360.com.

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