What Are Regional/Local/Community Currencies?

In economics, there are a variety of currencies that can be found in one locale. A local currency is one that is spent in a certain geographical location. A regional currency refers to a local currency utilized in a larger area, and a community currency is often used within a specific community as a means of exchange. 

Local currencies are usually created for a variety of reasons – sometimes to encourage spending within local groups and businesses. Sometimes they are created because a community of people doesn’t trust the legal tender of their state. This distrust is a phenomenon that is not new but as old as money itself. While modern-day economics may seem to be more structured and stable, many local economies around the world, particularly around South America, are experiencing high rates of inflation that is leaving local communities seeking alternative means of exchanging goods. 

Another common reason for using a community currency is the belief that money harms the civilized interaction of individuals because everything becomes focused on maximizing profit. This social reason encourages employment creation, promotes various local activities and small businesses, and strengthens community solidarity.

The way that local currencies measure value can differ – some are exchanged 1:1 for local legal tender. Others use work time as a currency and then calculate the value of each persons’ time in the same way. 

Forgery is not a huge problem in smaller communities. Still, as the planet’s population grows, pressure on these local currencies increases when governments begin to sense competition in the monetary system. 

Blockchain technology offers a few solutions to the challenges faced by local currencies. One solution is to automate the currency’s loss of value over time. Typically, a token is worth a fixed amount of an asset (whether that’s something tangible, working hours, etc.). 

However, many regional currencies want their units to slowly lose value over time so that nobody starts hoarding them. The blockchain infrastructure separates documentation from tokenization and allows you to introduce a gradual loss of value natively to the tokens, for example, one percent per day or month. This separation is a simple technological solution and works perfectly in an all-digital community.

Author: Johannes Schweifer is the CEO of CoreLedger, a company empowering businesses of all sizes to access the benefits of blockchain technology. Schweifer co-founded several blockchain start-ups, including Bitcoin Suisse. He’s a passionate problem solver, holding a master’s degree in Chemistry and a PhD in distributed computing and quantum chemistry.