News that a small-town police chief from Vicco, Kentucky, will accept his salary in bitcoin has taken the web by storm.

Later today, Vicco's mayor Johnny Cummings will make the transaction: sending bitcoin from the town's wallet to Police Chief Tony Vaughn.

"The city has a bitcoin account now," Cummings explained, "Thursday's the pay period so today we're going to transfer his money."

But Vicco's involvement with bitcoin doesn't stop here. Cummings announced that he and Vaughn would donate their salaries for the month to a wallet setup for donations to the embattled town.

Cummings believes the digital currency will rise in value over time, with the wallet acting as a long-term investment for the town's public works. He said:

Two days ago, The Hazard Herald, a local newspaper, reported that Vicco's city commission approved Vaughn's request to have his salary paid in bitcoin after several weeks of study.

This approval paved the way for the city's transaction with Vaughn today, which would make it the first instance of a US government entity paying an employee via cryptocurrency.

According to Cummings, Vaughn's salary would have federal and state taxes deducted before being converted to bitcoin at the prevailing rate. This would be done on a month-by-month basis.

Vaughn is the sole member of Vicco's police department, and its first policeman in 20 years. The town has a population of little more than 300 people within its city limits.

Cummings said the bitcoin community has shown great support for the town, with one bitcoin user offering to pay the salaries of Vaughn and any other policemen the town may hire. Vaughn could not be reached for comment at press time.

However, a potential drawback of this plan was highlighted today when the price of bitcoin fell dramatically. CoinDesk's Bitcoin Price Index showed a drop of 22.5% to $889.01 following a statement issued by China's central bank that warned of the cryptocurrency's risks.

Despite bitcoin's price tumble today, Cummings said both Vicco and Vaughn remain undeterred in their commitment to the currency. He said:

Cummings added that other city employees are now considering getting their salaries paid in bitcoin instead of fiat currency. "They're all inquiring and looking into it now," he said.

Vicco was the subject of intense media attention after it was featured on satirical current affairs programme the Colbert Report. It became known to many as the smallest US town to pass a fairness ordinance prohibiting discrimination based on sexual orientation.

According to the Hazard Herald, the town received a number of donations after the episode aired, including playground equipment for a new park near City Hall.

"That was just crazy, that was when all the production companies and everyone else kept calling," Cummings said.

When asked if Vicco's move to approve Vaughn's pay in bitcoin was an attempt to attract media attention to the town again, Cummings said:

Vicco is bracing itself for economic hardship as the coal mining industry it depends on faces a severe decline, Cummings added.

"The coal industry is dying here, and my job as mayor is to try and find other avenues for the people of the city, because it's not good right now," he said.

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