Local Currency Primer

8/7/2019 Local Currency Primer

1/4

LOCAL CURRENCY

Definition:

Complementary currencies (CCs), also often described as alternative currencies orcommunity currencies or social currencies are better understood as monetary instrumentsthat meet needs or incentive behavior that national currency systems do not.

There are a wide range of different CCs which all have the common understanding thatmoney has, and always will be, a socially and politically constructed phenomenon. Given this,we should always seek to construct money in a way which meets our key societal goal. Moneyshould allow individuals to specialize to a high degree and exchange goods and serviceswithout compromising our wider social, economic and ecological needs.

Current legal tender currency systems are very strong in developing high profits and building a

globalized society. However, they have proved less effective in supporting even regionaleconomic development, stimulating ecological policy goals and behaviors and encouragingan active civil society. Instead, it has proven to be a good strategy to use complementarycurrency programs to realize specific local and regional goals, including: the creation of jobsat local level, relocating production and consumption, supporting a vibrant SME (small andmedium sized enterprise sector), building a strong and active civil society, stimulatinginnovation and the development of local solutions to global problems, e.g. oil-dependence.

The current economic/financial situation faced by many regions calls for new arrangements forcommunities to remain / become resilient. Complementary Currency programs offer a proventoolbox to develop and implement these strategies.


2/4

AIMS:

The aim of these programs is to increase the velocity of money in a defined region (e.g. a city,a neighborhood, a valley, a municipality) and so increase the size of the economy in thatregion, and thus create jobs, stimulate innovation and increase local/regional resilience. Notescan, normally, only be spent at the participating SME retailers. Retailers can exchange thenotes back into legal tender, sometimes with an exchange fee. The fee can be used to donateto charity or cover the operational costs of the program.

The biggest challenge is to achieve a platform that leads to realizing specified goals; operateswithin legal boundaries ; can be implemented in the face of finite financial and humanresources.

The first relevant questions:

What purpose does the currency have (aims, goals etc.)?

Which are the currencys target groups?

What are the reasons/benefits for the target groups to participate (what problems does thecurrency solve and which alternatives than a currency are available to solve the problem, doesa currency give better value for money)?

What service area(s) does the currency cover?

CURRENCY MEDIUM

A currency can come in different forms; paper-based, card based, via an internet payment

platform etc. Most digital currencies backed in legal tender are regulated. Paper currencies,backed by legal tender, are not currently subject to regulation but treated in a similar way togift vouchers.


3/4

FEE STRUCTURE

It is important to set up a fee-structure that in the longer-term, makes it possible to overcomedependency upon either volunteer labor or grant-funding. We are able to use the fee to:

Cover the operational costs. This can be done by splitting the income between the community,and the Service Organization that has responsibility for the handling, development, innovation,and assisting new systems in the start-up

Form a guarantee fund (for bad debts, our internal insurance)

Stimulate local and regional trade (over long distance trade)

Stimulate green and social products and services (over grey and unethical products)

Discourage fraud. Fraud will weaken the trust in our system. Besides (electronic) safety,we need clever fees.

Discourage speculation

Ten Steps to get the local currency going:

1. start or build on a strong civic initiative (i.e. transition towns)

2. organize an open meeting on a topic related to money

3. identify and engage your stakeholders (residents and local traders)

4. set up a management team to cover the different roles

a) treasurer,

b) trader liaison,

c) community liaison,

d) press liaison,

e) design,

f) facilitator,

g) directory producer or webmaster,

h) events coordinator,

i) secretary

j) it maybe a good idea to seek the participation of non-profit organizations and coops,because they may already have a lot of contacts and knowledge about the locality

k) some local currencies work together with secondary schools/cgeps: to provide a thematiccourse for the curriculum and to engage children in the initiation and operation: kids havea lot of influence on their parents...


4/4

5. Decide on the model:

a) exchange rate (often 1:1 for customers; 1: 0.90 for members of the local currency bank(so this group of people have an automatic discount of 10% on everything; the currencycan be distributed by non-profit organizations who buy at 1: 0.97 and sell at 1:1)

b) how much to issue

c) validity term, demurrage: by automatically periodically devalidating the money (i.e. 5% per

year), the hording is discouraged and keeping the money in circulation is encouraged. Thedevalidating can be balanced by selling stickers to re-validate after one year. Or you couldorganize a yearly money fair where everyone can spend for the last time before the moneylooses its value and is exchanged for the new bills at a 1: 0.95.

d) limiting traders is a possibility (i.e. excluding traders that sell nothing that has been locallyproduced or companies that are publicly traded

6. Launch a design competition (school kids could very well participate in this); and have after avote the note poll to decide; maybe you want to let local figure appear on thedenominations

7. decide on your legal structure

a) coop, to allow for democratic control and management; necessitate a membership feeb) CIC (community interest company) less heavy administration and fundable by government

8. Generate start-up funding (publicity and printing); try to get initial (donated) financing bybigger traders; print and sell t-shirts/badges/posters

9. organize a memorable launch event (on a preferably historic occasion)

10. nurture and develop the scheme; maybe get a part-time development manager(tapping local councils for money etc)

Documents

Local Currency Primer