Regional/Local/Community Currencies

November 21, 2023 - Around 3 mins mins to read

Understanding Regional/Local/Community Currencies

Regional/local/community currencies refer to various forms of currency that are specific to certain geographical areas. A local currency is limited to a particular location, while a regional currency can be used in a larger area. On the other hand, a community currency is designed for use within a specific community as a medium of exchange.

Local currencies are created for different purposes, such as promoting local spending and supporting local businesses. In some cases, communities create their own currencies due to a lack of trust in the official legal tender issued by the government. This lack of trust in traditional currencies is not a new phenomenon and has been observed throughout history. Despite the perceived stability of modern economies, many local economies, especially in South America, are experiencing high inflation rates, prompting communities to seek alternative means of conducting trade.

Another motivation for using community currencies is the belief that conventional money can have negative effects on social interactions by prioritizing profit maximization. Community currencies aim to encourage employment opportunities, support local activities and small businesses, and strengthen community bonds.

The methods used to determine the value of local currencies can vary. Some local currencies are directly exchanged at a 1:1 ratio with the official legal tender. Others use work time as a form of currency, assigning a specific value to each individual’s time.

In smaller communities, forgery is not a major concern. However, as the global population grows, local currencies face increasing pressure when governments see them as competition within the monetary system.

Blockchain technology offers potential solutions to the challenges faced by regional/local/community currencies. One solution involves automating the gradual depreciation of the currency over time. Typically, a token represents a fixed amount of an asset. However, regional currencies often incorporate a mechanism to gradually decrease the value of the tokens to discourage hoarding. Blockchain technology allows for the separation of documentation and tokenization, enabling the implementation of a native depreciation, such as a one percent decrease per day or month. This technological solution is particularly effective in all-digital communities.

Author: Johannes Schweifer is the CEO of CoreLedger, a company that empowers businesses of all sizes to leverage the benefits of blockchain technology. Schweifer has co-founded several blockchain start-ups, including Bitcoin Suisse. With a master’s degree in Chemistry and a PhD in distributed computing and quantum chemistry, he is a dedicated problem solver.