Generic  Currency  Model  Overview  

1. Overview  of  currency  types  

a. Timebank  

Time  Banking  is  the  community  currency  concept  in  which  time,  typically  hours,  are  used  as  unit  of  account.  Services  provided  for  in  the  context  of  time  banking  are  valued  according  to  the  time  it  takes  to  deliver  them,  regardless  of  who  does  it  or  what  the  “market  value”  is.  

A  Time  Bank  is  typically  are  community-­‐run  organizations  that,  according  to  Gill  Seyfang  (2002:4)  turns  unpaid  time  into  a  valuable  commodity,  and  aims  to  build  social  capital  and  promote  community  self-­‐help  through  mutual  volunteering  (both  giving  and  receiving  help  in  exchange  for  time  credits).  Across  the  world,  many  different  organizational  models  and  have  been  developed  to  run  time  banks.  The  differences  are  often  significant  but  overlooked  in  comparison  to  the  idiosyncratic  nature  of  timebanking  itself.  

The  idea  of  Time  Banking  was  described  and  popularized  by  Edgar  S.  Cahn  in  1986.  He  applied  the  principle  and  the  so  called  Time  Dollars  to  social  projects  (education,  healthcare,  youth  justice)  in  Washington  D.C.  He  later  expanded  his  projects  to  include  Florida  and  Chicago.  Cahn’s  objective  was  to  address  the  inadequacy  of  the  government’s  ability  to  provide  sufficient  social  services  and  to  deal  with  social  problems  existing  in  Washington  D.C.  (Greco  2001:  98).  Consequently  the  idea  rapidly  spread  across  the  US  and  from  the  1990s,  when  the  New  Economics  Foundation  had  invited  him  to  speak  at  the  TOEF  conference  in  London,  through  the  UK.  

Often  compared  to  other  volunteering  facilities,  volunteers  in  a  Time  Bank  are  deliberately  rewarded  for  their  contribution  with  time  credits  for  which  they  can  in  turn  receive  ‘voluntary’  benefits  themselves.  “One  hour  of  everyone’s  time  is  worth  one  time  credit”,  no  matter  the  task.  Social  services  accomplished  through  Time  Banking  may  include  education,  babysitting,  healthcare,  computer  tuition  and  gardening.  Time  Banks  can  attract  socially  excluded  groups  of  people  (e.g.  unemployed,  poor,  retired,  elderly  and  disabled),  volunteers,  and  those  dependent  upon  receiving  services  (e.g.  elderly  and  disabled)  (Seyfang  2004a:  244).  This  is  accomplished  building  upon  and  referring  to  the  core  values  of  timebanking  (Timebanks  US,  2012;  Timebanking  UK,  2012):  

1. Asset:  We  are  all  assets  and  we  all  have  something  to  give.  2. Redefining  Work:  Some  work  is  beyond  price  but  needs  to  be  honored.  3. Reciprocity:  Helping  works  better  as  a  two-­‐way  street.  4. Social  Networks:  We  need  each  other,  to  reweave  communities  of  support,  strength  &  trust.  5. Respect:  Every  human  being  matters.  

Time  Banking  seeks  to  strengthen  social  cohesion  and  encourage  a  more  human  approach  to  interactions  and  exchanges.  Despite  some  similarities  with  LETS  currencies  in  terms  of  being  typically  run  as  non-­‐for-­‐profit  initiatives  and  involving  individuals  as  providers  of  goods  and  services,  time  banks  have  their  focus  outside  of  what  is  commonly  seen  as  the  economic  sphere.(Seyfang,  2002:2).  The  absence  of  a  pricing  mechanism  in  timebanking  (one  hour  of  service  is  always  valued  at  just  one  hour)  further  illustrates  this.  Time  Banks  are  thus  designed  in  a  complementary  fashion  to  fill  the  gaps  of  social  services  (rather  than  goods)  that  the  conventional  economy  cannot  deliver.  

In  the  understandings  of  Seyfang  (2002:  4-­‐5),  the  objectives  of  Time  Banks  are:  

• to  engage  members  of  the  population  who  are  socially  excluded  and  would  not  normally  be  involved  with  community  volunteering  initiatives;  

• to  enable  them  to  meet  their  needs  through  exchanging  time,  earning  and  spending  time  credits,  including  boosting  skills,  self-­‐esteem  and  confidence  of  participants;  

• to  build  social  capital  and  foster  friendships,  reciprocity  and  trust  through  participative  engagement;  

• to  encourage  community  involvement,  by  valuing  and  rewarding  the  (normally  unpaid)  social  work  which  is  essential  for  healthy,  sustainable  communities  (Cahn,  2000).  

Time  banking  is  fundamentally  anchored  in  the  concept  of  co-­‐production  (Cahn,  2000).    Cahn  defined  co-­‐production  as  a  new  way  of  thinking  about  society  based  on  respect.  Co-­‐production  values  people  as  assets,  recognises  unpaid  work  and  builds  social  capital  through  reciprocity.    Timebanking  lies  at  the  heart  of  co-­‐production,  and  is  a  key  mechanism  for  changing  relationships  in  a  way  that  is  integral  to  co-­‐production  (Timebanking  UK,  2012)  

b. LETS  

Local  Exchange  Trading  Systems  or  Local  Employment  and  Trading  Systems  (LETS)  are  ‘social’  mutual  credit  currencies  where  members  trade  skills,  services  and  resources  with  each  other  by  using  credits  issued  by  members  themselves.  LETS  was  originally  conceived  by  Michael  Linton  in  1983  in  Canada  as  “a  self-­‐regulating  network  which  allows  its  users  to  issue  and  manage  their  own  money  supply  within  the  boundaries  of  the  network”  (Linton  and  Soutar,  1994).  

As  a  voluntary  association  of  individuals  (members),  LETS  typically  hold  the  following  features  (Linton  and  Soutar,  1994):  

• co-­‐operation:  no-­‐one  owns  the  network  • self-­‐regulation:  the  network  is  controlled  by  its  members  • empowerment:  all  network  members  may  ‘issue’  the  ‘internal  currency’  • money:  used  primarily  as  a  means  of  exchange  

LETS  hold  many  similarities  with  barter  systems.  Whereas  barter  can  be  essentially  defined  as  being  for  businesses  purposes  only,  LETS  are  meant  to  encourage  ordinary  citizens  to  trade  with  each  other  and  is  usually  run  by  volunteer  community  members  on  a  not-­‐for  profit  basis  (Greco,  2001:  89).  

A  LETS  is  designed  to  strengthen  the  local  economy  and  empower  community  members  (Seyfang,  2002:  3).  A  LETS  makes  the  economy  more  resilient  by  addressing  two  failures  of  the  mainstream  monetary  system:  it  provides  an  abundant  medium  of  exchange  and  it  creates  a  currency  that  cannot  leave  the  area  (Seyfang,  2004:  7).  By  exchanging  goods  and  services  with  local  currency,  members  (theoretically)  save  on  the  expenditure  of  official  currencies  and  thus  increase  their  

purchasing  power.  LETS  currency  is  at  the  same  time  abundant  as  credit  is  simply  created  with  every  transaction  and  inflation-­‐free.  As  a  result  of  the  increase  of  personal  economic  relations,  LETS  also  serve  as  a  means  to  encourage  social  cohesion  and  community  building.  

LETS  can  be  effective  in  attracting  people  excluded  from  the  mainstream  economy  (e.g.  unemployed).  Indeed,  LETS-­‐credit  enables  people  at  the  margins  of  society  to  exchange  goods  and  services  not  valued  in  the  conventional  market  economy.  By  becoming  economically  active,  they  consequently  gain  opportunities  to  reconnect  to  their  community  and  therefore  improve  their  socio-­‐economic  condition.  

There  is  a  great  variety  of  LETS  initiatives  around  the  world,  most  of  which  are  located  in  Canada,  Australia  (where  most  are  referred  to  as  CES),  New  Zealand  and  Europe  (called  SEL  in  French  and  Tauschringen  in  Germany).  Prominent  examples  include:  

• Calgary  Dollars  (Canada),  • LETSLink,  a  service  organization  for  LETS  in  the  UK,  • Le  Grain  de  SEL  –  Système  d’Échange  Local  (France),  • Noppes  (The  Netherlands).  

c. Legal  Tender  Backed  Currency  Legal  tender  backed  refers  to  any  currency  system  where  the  physical  note,  or  digital  money,  is  backed  by  an  equivalent  amount  of  legal  tender  currency  held  at  a  central  place,  either  a  bank,  credit  union  or  currency  operator  location.  

These  currency  schemes  generally  aim  to  promote  local  economic  activity  by  implementing  a  payment  mechanism  (often  including  physical  vouchers)  that  can  be  used  for  purchases  from  local  businesses.  The  underlying  principle  is  that  the  currency  encourages  consumers  to  purchase  goods  and  services  from  local  businesses  that  in  turn  purchase  goods  and  services  from  local  suppliers,  or  pay  their  staff  partly  with  the  local  currency.  The  intention  is  that  the  scheme  creates  a  ‘local  multiplier’  effect,  keeping  spending  within  the  local  area  while  and  reducing  hoarding.  This  ensures  that  each  unit  of  local  currency  has  a  greater  velocity  and  thus  each  means  that  each  unit  supports  more  economic  activity,  since  it  is  spent  more  times  within  the  local  community.  

In  order  to  further  reduce  the  incentive  to  hoard  money  and  increase  the  local  multiplier  further  some  currencies  (Chiemgauer  Germany,  Mesure  France,  Stroud  Pound  UK)  implement  demurrage  in  their  systems.  Demurrage  is  a  negative  interest  rate  that  acts  as  an  effective  cost  of  holding.  Demurrage  in  a  currency  system  also  reduces  discount  rates,  and  thus  increases  the  present  value  of  a  long-­‐term  investment,  and  thus  gives  an  incentive  for  such  investments.  

As  well  as  economic  goals  these  currencies  often  also  promote  social  aims.  There  are  reports  that  businesses  who  accept  local  currencies  benefit  through  the  …  of  2  networks,  one  with  other  businesses  in  the  network  as  well  as  the  user  of  the  local  currency.  The  businesses  are  drawn  together  by  the  common  desire  to  support  a  local  initiative  but  also  because  the  businesses  need  to  find  outlets  and  uses  for  the  local  currency  that  they  accept.  Currency  operators  will  often  offer  specific  services  to  businesses  members  to  encourage  these  kinds  of  links.  Businesses  and  users  also  report  that  there  is  a  reinforcement  of  the  relationship  between  then  as  users  seek  out  businesses  that  are  part  of  the  network,  engage  in  more  frequent  conversations  with  the  businesses  and  shop  more  frequently  at  those  places.  Interestingly  the  overall  community,  beyond  the  businesses  and  

users  of  the  network,  may  also  benefit  from  the  mere  presence  of  a  local  currency  initiative  in  their  area  by  increasing  the  pride  that  people  feel  for  their  local  area.  

These  currencies  are  currently  proliferating  across  the  NW  Europe  region  with  well  over  50  already  in  operation  and  a  similar  number  at  various  stages  of  implementation.  

d. Closed  loop  currency  systems  Closed  loop  currency  systems  comprise  a  variety  of  currency  systems  from  mutual  credit  exchanges,  where  the  members  create  the  credit  or  money  at  the  point  of  engaging  in  a  trade  (Sardex  Italy  etc.),  to  credit  clearing  systems  where  a  central  authority  issues  credit  to  users  in  complementary  currency,  often  against  assets  (WIR  Switzerland)    

Another  common  feature  is  that  the  complementary  currencies  are  not  convertible  into  legal  tender.  

These  systems  almost  exclusively  designed  to  be  used  by  the  businesses  in  order  to  facilitate  the  exchange  of  goods  and  services  within  the  network’s  members  through  the  use  of  a  virtual  currency.    

These  schemes  can  be  especially  effective  at  providing  businesses  with  alternative  means  of  payment  during  economic  downturns,  when  ordinary  currency  can  be  scarce.  Closed  loop  currency  systems  use  a  business-­‐to-­‐business  currency  to  perform  transactions.  Members  buy  and  sell  products  and  services  among  each  other  using  this  internal  ‘business  to  business  currency’  thus  enabling  participants  to  increase  their  volume  trade  beyond  what  would  be  possible  where  they  restricted  to  using  legal  tender.    

A  major  difference  in  how  these  currencies  systems  can  operate  is  with  regard  to  how  credit  limits  are  assigned  and  created.  Whereas  within  mutual  credit  exchanges  all  participants  start  with  an  account  balance  of  zero  and  accounts  are  debited  when  purchases  are  made,  and  credited  when  sales  are  made  in  centralised  credit  clearing  systems  a  specified  volume  of  credit  is  assigned  to  accounts  based  on  a  variety  of  factors  who  are  then  free  to  use  them  to  trade  within  the  network.  However  because  this  has  almost  no  bearing  on  the  legal  aspects  in  question  it  remains  suitable  to  group  these  models  together.  

e. Hybrid  Currency  Systems  There  are  also  a  growing  number  of  systems  that  are  combining  different  models  to  create  new  and  unique  currency  systems.  Some  notable  examples  are  

• RES,  Belgium  o RES  is  a  complementary  currency  launched  in  Belgium  in  1996  that  operates  

as  a  closed  loop  payment  system,  modelled  after  the  WIR  Bank  but  allowing  consumers  to  purchase  RES  prepaid  credit  for  Euros  

o The  RES  is  a  digital  currency  with  consumers  and  businesses  holding  credits  on  a  chip  and  pin  card,  which  can  then  be  used  to  complete  transactions  at  member  businesses.  

• SoNantes,  France  o The  currency  will  operate  as  a  mutual  credit  system  between  businesses  

(B2B)  ! Businesses  will  only  be  able  to  earn  and  spend  the  currency  by  

trading  their  goods  and  services  with  other  members  of  the  business  

network,  within  a  pre-­‐arranged  credit  limit  set  by  the  Credit  Municipal  de  Nantes.  

o Consumers  (B2C)  will  also  be  able  to  exchange  euros  for  SoNantes  o SoNantes  will  only  be  a  digital  currency  

This  means  that  when  assessing  new  systems  it  is  always  important  to  consider  the  exact  architecture  of  the  currency  as  it  may  not  easily  fit  into  one  of  our  predefined  buckets  listed  above.