Innovation Sparks Community Currencies – IMF F&D
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- Authors: ANDREAS ADRIANO
- Published: March 1, 2021
Historical origins and early experiments
- Johann Silvio Gesell (born in 1862) promoted Freiwirtschaft: Freigeld (free money), Freihandel (free trade), and Freiland (free land).
- Gesell’s mechanism: require holders to buy monthly stamps to keep currency value (a “hoarding tax”) to boost circulation.
- Wörgl experiment (1931): local Freigeld financed infrastructure investment, created jobs, and boosted activity; Austria’s central bank shut it down after two years.
- John Maynard Keynes called Gesell “a strange, unduly neglected prophet” and praised the stamp mechanism.
- Irving Fisher advocated “Stamp Scrip” during the Great Depression; hundreds of scrips were issued across the United States.
- Tenino, Washington: local dollars printed as wooden cards; in 2020 the city minted new wood chips using the same press used 90 years earlier.
- WIR franc (launched in 1934, Switzerland): a credit cooperative backed by real assets; annual turnover is around $7 billion.
Technological resurgence: mobile payments and blockchain
- COVID-19 recession catalyzed expansion of digital community currencies, mirroring growth during the Great Depression.
- Maricá, Brazil: doubled its income supplement program to residents, paid in mumbucas, two months before any federal support; most transactions occur via mobile phones.
- Integrations of mobile payments with blockchain enable immutable decentralized ledgers and real-time transaction recording.
- Good4Trust (Turkey): preparing to launch a blockchain-based community currency powered by Celo.
- Brixton (London): launched pounds in 2008; in January 2021 announced a digital version using blockchain from Algorand.
- Sarafu (Kenya): leverages blockchain and mobile phones; used by 41,000 people across 60 villages; in 2020 spent the equivalent of $2.5 million in over 335,000 transactions.
- Creator Will Ruddick: “This platform allows a group of farmers to come together and create their own currency and a resilient economic system from the bottom up.” “Currency is vital infrastructure.”
Operational advantages and evaluation capabilities
- Recording transactions on blockchain allows real-time data collection and evaluation of social initiatives.
- Danish Red Cross uses transaction data to study program effects: “For the first time, we can observe a program’s impact in real time,” says Adam Bornstein, head of the innovative finance and systems change team.
- Real-time data enables course corrections “within days rather than wait for surveys 12 months after the fact.”
- Transaction data can be used to create early warning systems for disasters, improving flexibility in deploying humanitarian resources.
- Bornstein on humanitarian finance: “The world is complex and dynamic, whereas humanitarian finance and procurement policies are inherently inflexible.”
Community and systemic implications
- Core objectives remain strengthening communities and supporting local business.
- New technologies and social entrepreneurship expand experimentation and potential mainstreaming of alternative currencies.
- Local currencies can provide a testing ground for central bank digital currency initiatives.
- Ezechiel Copic (Celo): “Local currencies can provide a testing ground for these initiatives.”
- Alternative currencies may evolve from local development tools into broader policy instruments with national implications.
Innovation Sparks Community Currencies – IMF F&D, March 2021
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- فكرة جديدة قديمة
- 货币 - 旧理念萌发新芽 - 金融与发展 - 国际货币基金组织季刊 -2021年3月号·第58卷
- Innovation Sparks Community Currencies – IMF F&D
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