Regional/Local/Community Currencies

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

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.

One of the motivations behind 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. By using a currency that is specific to their community, individuals can contribute to the local economy and have a say in how it functions.

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. For example, the Bristol Pound in the United Kingdom is pegged to the British Pound Sterling. Others use work time as a form of currency, assigning a specific value to each individual’s time. In these cases, individuals can trade their skills and services with others in the community using a time-based currency. This approach emphasizes the importance of human capital and allows people to exchange their time and expertise without relying on traditional money.

In smaller communities, forgery is not a major concern. However, as the global population grows and local currencies gain popularity, they face increasing pressure when governments see them as competition within the monetary system. Governments may view these alternative currencies as a threat to their control over the financial system and attempt to regulate or ban their use. For example, in 2010, the Brazilian government banned the use of local currencies in certain regions.

Blockchain technology offers potential solutions to the challenges faced by regional/local/community currencies. Blockchain is a decentralized and transparent digital ledger that securely records transactions. One solution involves using blockchain technology to automate 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 and promote circulation. 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 where transactions can be easily tracked and recorded.

By utilizing blockchain technology, regional/local/community currencies can benefit from increased transparency, security, and efficiency. Blockchain provides a decentralized and tamper-resistant platform for recording transactions, reducing the risk of fraud and manipulation. Additionally, blockchain technology allows for peer-to-peer transactions without the need for intermediaries, reducing transaction costs and enabling faster settlements. These advantages make blockchain an attractive option for communities looking to enhance the functionality and sustainability of their local currencies.

It is important to note that while blockchain technology can provide benefits to regional/local/community currencies, it is not a one-size-fits-all solution. Implementing blockchain technology requires careful consideration of the specific needs and goals of the community. Factors such as the size of the community, its level of digital adoption, and the regulatory environment must be taken into account.

In conclusion, regional/local/community currencies are forms of currency that are specific to certain geographical areas or communities. They are created to promote local spending, support local businesses, and strengthen community bonds. Blockchain technology offers potential solutions to the challenges faced by these currencies, including automating the gradual depreciation of the currency over time. By leveraging blockchain, regional/local/community currencies can benefit from increased transparency, security, and efficiency. However, implementing blockchain technology requires careful consideration of the specific needs and goals of the community.

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.