## New Old Idea — Technological innovation is fueling the resurgence of community currencies

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**Canonical URL:** [New Old Idea — Technological innovation is fueling the resurgence of community currencies](https://www.imf.org/-/media/files/publications/fandd/article/2021/march/en/technological-innovation-fueling-community-currencies-adriano-en.pdf)

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### Historical background and theory
- Johann Silvio Gesell (born in 1862) developed the doctrine of Freiwirtschaft (free economy) in 1891, based on three pillars: Freigeld (free money), Freihandel (free trade), and Freiland (free land).
- Gesell’s prescription: money should “go out of date like a newspaper, rot like potatoes, and rust like iron,” implemented via a monthly stamp requirement (a “hoarding tax”) to preserve value and stimulate circulation.
- The Austrian village of Wörgl implemented Freigeld in 1931, financing local infrastructure, creating jobs, and boosting economic activity; the experiment was shut down by Austria’s central bank after two years.
- Irving Fisher advocated stamp scrip during the Great Depression; hundreds of scrips were issued in the United States (example: Tenino, Washington, which used wooden local dollars).
- The WIR franc, launched in 1934 in Switzerland, remains in circulation as a credit cooperative; annual turnover is around $7 billion.

### Modern technological resurgence and examples
- Digital community currencies expanded amid the COVID-19 recession, leveraging mobile payments and blockchain to scale local experiments.
- Maricá, Brazil: able to double its income supplement program to residents paid in mumbucas two months before any federal support arrived; while cards exist, most transactions use mobile phones.
- Good4Trust (Turkey): preparing to launch a community currency using blockchain powered by Celo.
- Brixton (London): launched its pounds in 2008; in January 2021 it announced a digital version using blockchain from Algorand.
- Sarafu (Kenya):
  - used by 41,000 people across 60 villages;
  - in 2020 spent the equivalent of $2.5 million in over 335,000 transactions;
  - all transactions conducted through mobile phones.
- Origin of sarafu: initial paper-based community currency in Kenya launched in 2010 by Will Ruddick.

### Functional capabilities enabled by technology
- Combining mobile payments with blockchain provides an immutable decentralized ledger where all computers in a network record transactions simultaneously.
- Recording transactions in blockchain allows for real-time data collection and evaluation of social initiatives.
  - Danish Red Cross uses the data to study program effects in real time; quote: “For the first time, we can observe a program’s impact in real time,” says Adam Bornstein.
  - Real-time visibility enables course correction “within days rather than wait for surveys 12 months after the fact.”
- Data from digital community currencies can be used to create early warning systems for disasters and give institutions more flexibility in deploying resources.
  - Quote: “The world is complex and dynamic, whereas humanitarian finance and procurement policies are inherently inflexible,” says Adam Bornstein.

### Development implications and potential policy uses
- Community currencies focus on strengthening communities and supporting local business, and experimentation can have broader, potentially national, implications.
- Local currencies can serve as a testing ground for central bank digital currency initiatives.
  - Quote from Ezechiel Copic (Celo): “There’s a lot of focus on central bank digital currency. Local currencies can provide a testing ground for these initiatives.”
- With new technologies and social entrepreneurship, alternative currencies might find their way into the mainstream.

*ANDREAS ADRIANO is on the staff of Finance & Development.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/march/en/technological-innovation-fueling-community-currencies-adriano-en.pdf_