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Cities tap into digital currency to spur economic growth

Local digital currency may be more important than ever as governments look for ways to rebound from the devastating effects of COVID-19.

Cities tap into digital currency to spur economic growth media 1

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Are community currencies a better way to shop? - BBC Worklife

Currencies like the Bristol Pound support local retailers and build a sense of community, proponents say – and now some are going digital.

Are community currencies a better way to shop? - BBC Worklife

Brave New Coin

Brave New Coin

Hullcoin: The World's First Local Government Cryptocurrency?

David Gilson reports on the very first UK local government operated cryptocurrency, HullCoin.

Hullcoin: The World's First Local Government Cryptocurrency?

Why your city should think about starting its own currency |

Want to support local businesses? Here’s an idea that could help your community and the independent shops you love.

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Local currencies the German way: the chiemgauer | Foreign currency | The Guardian

<p>The chiemgauer, a school currency project in southern Germany, is the envy of other currency schemes as shoppers opt for local cash to spend in local shops</p>

Local currencies the German way: the chiemgauer | Foreign currency | The Guardian

Highlights

  • Local digital currencies can help boost the local economy during times of economic distress.

  • Some local digital currencies offer payment for 'good deeds' or charitable work, making them valuable during periods of high unemployment.

  • Before creating a digital currency, cities must define clear goals and examine the cost-benefit of the undertaking.

  • Beyond economic benefits, local digital currencies can boost citizen engagement and encourage behavior that leads to health and environmental benefits.

Zusammenfassung

When local governments introduce a digital currency, they create another way to power the local economy. More importantly, it allows for more targeted stimulus when needed. But beyond the more obvious economic impacts, cities are using them as a tool to engage with, and even influence, their community.

This story is not aimed at covering every attempt at a city currency (after all there are now $ more than ten thousand such projects operating around the world$ ), but rather to point out some considerations cities looking to roll out a city-wide digital currency should know. Some local governments have done so quite successfully, and with impact far beyond support of the local economy. There’s a lot to learn from them.



The basics

$ A $ $ local currency$ $  is a currency that can be spent at participating organisations within a particular geographical locality$ . Local digital currency can be purchased with third party apps, the user simply inputs a credit or debit card to begin earning points or rewards for their actions and purchases within the app.

These currencies fundamentally aim to strengthen the local economy by supporting local businesses and are $ seen by proponents as an innovative tool to help local trade flourish against the trend towards globalisation$ .

Local digital currencies can also be effective at promoting community involvement and resilience, from volunteerism to healthy lifestyle choices. This can be a very powerful (and valuable) tool for local governments globally, as all search for ways to better engage their citizens and to help foster enduring and inclusive communities.

If done right, there is huge potential for more digital citizen engagement and incentives to encourage behaviour that promotes a stronger, more connected city overall. For instance, $ one Dutch project, Samen Doen, encourages currency holders to participate in socially beneficial activities such as caring for the elderly$ .

Keeping money local

The use of community currencies is fairly common in the U.K., from the $ Brixton Pound$  and $ Bristol Pound$  (Britain's largest community currency), to Hull’s cryptocurrency $ HullCoin$ . In all cases the currency is deployed in an attempt to strengthen local businesses, with some focusing on community good-will and environmental protections.

Managing Director for the Bristol Pound, Diana Finch thinks:

$ “Investing in small organizations is the best way to create jobs and has the most impact on a region’s economy, rather than big companies which … might just pull out of Bristol tomorrow and leave a gaping hole.” $ 

Ultimately, these currencies have the potential to strengthen the relationship and interaction between governments and their citizens and improve quality of life for their people and local businesses. Community currencies, if run with strong leadership, can also instill a sense of community pride that further aids in supporting small business efforts.

Citizen engagement through digital services

Many community currency programmes have deployed reward schemes to foster improved communication and engagement with residents. These digital programmes are run through various payment apps, downloaded by residents and businesses on their smart devices.

In most cases there are incentives to participate, such as points for downloading the app, points for referrals for subsequent app downloads, points for shopping local, and “frequent flyer” style points for returning to a local shop.

In some cases, these ‘digital currency’ apps have also extended their impact by $ rewarding neighbourliness$ , encouraging green choices (for instance, $ shopping and sourcing local can impact CO2 emissions$ ), and making healthier lifestyle decisions — all of which directly link to a city’s resilience, inclusiveness, and ultimately, quality of life for the citizens it serves.

We would argue this is the most valuable and important feature of these digital currencies — the ability to impact behaviour. The ability to encourage eco-friendly mobility choices, such as the use of public transport vs. driving a personal car, is powerful for a city.

We can look to these examples as ways others have ‘gamified’ the community currency using a more human-centered approach to do more than simply support small business.

Project highlights across the globe

Tel Aviv, Israel

Tel Aviv-based company, $ Colu$ , has pioneered innovative solutions which place the economic and social well-being of cities in the hands of local communities. Their digital wallet app rewards residents for local spending (at participating businesses). Cities like Tel Aviv-Yafo can leverage the app’s direct-to-citizen communication tools and essentially gamify positive actions through rewards, which can help further the city’s wider goals. Tel Aviv Coin (or ‘TLV coin’) $ rewards behaviours$  for actions tied to improved mobility, recycling, and volunteering in addition to simply buying local.

Hull, U.K.

The City of Hull is $ credited with introducing the world’s first entirely digital local currency$ . In 2014, building upon blockchain technology, the Yorkshire city debuted ‘$ HullCoin$ ,' which allows residents to earn via ‘good works’ (think volunteering and community involvement). The currency doesn’t have a set value; it can be redeemed at local businesses at rates they determine, $ sometimes with discounts up to 50 percent$ . These retailers then recirculate the HullCoins by issuing them to employees or donating them into community groups for reuse.

Berkshires Region, Massachusetts, U.S.

BerkShares launched in September 2006 in the Berkshires region of Massachusetts. U.S. Federal currency can be exchanged for BerkShares at four local banks. As of July 2019, over $ 400 local businesses accept the currency$ .

Prien am Chiemsee, Bavaria, Germany

This German town’s digital currency, the chiemgauer, behaves much like standard currency, as $ it’s supported by local banks and credit organisations$ . It began as a school project but has evolved into a profitable programme with more than 600 participating businesses. Thanks to the Regios association of co-operative banks, you can even make purchases in chiemgauer using a debit card.

This currency also has credit expirations, which has been found to boost more immediate spending for obvious reasons. The chiemgauer must be spent within 3 months or the currency loses value. Because of this, residents are encouraged to spend and support the economy to avoid depreciation. This keeps money flowing quickly into the local economy, which is good for business.

While supporting businesses pay an enrollment fee of sorts, the programme provides access to digital tools to help small businesses gain access to a larger audience than what would be otherwise feasible.

Belfast City Council

Thanks to former* 100 Resilient Cities and in partnership with Colu, $ Belfast Coin$  launched in 2019 as the first incentive-based digital currency in Northern Ireland.

*The 100 Resilient Cities (100RC) program, backed by the Rockefeller Foundation, was concluded in July 2019.

What you should know about creating a digital local currency

Define the objective

$ Starting a community currency is not for the faint of heart$ . The first step for any local government is to identify and clearly define the core objectives or goals that you aim to achieve for your community (i.e. increased frequency of rideshare, more use of micro-mobility, increased volunteerism, bringing more small businesses to your community, etc.).

While the list of goals will vary across municipalities, and ideally all goals can be achieved, starting with a few more clear-cut and measurable key performance indicators is encouraged, such as an X% increase in ridership on public transit, or X% increase in city-operated rideshare participation, resulting in CO2 emission decrease by X year, which can then be used as a springboard for more ambitious outcomes.

Teams or departments need to then determine how these KPIs translate into value for their investment into the community.

Determine the cost-benefit

The impact to a local government’s cash flow varies widely, yet a concerning number of governments are now facing dire consequences of revenue loss, resulting in layoffs, pay cuts and project delays, and threatening the very infrastructure of our cities and counties globally.

One major concern around these community currencies (when developed and run by the city) is finding a way to cover operating costs. Local governments address this in a variety of ways, from transaction fees to paying city employees partially through their currency. $ Others are mining their own cryptocurrency$ .

To limit long term cost exposure, especially if you are uncertain your community will respond with enough enthusiasm to sustain the programme, going the third party digital wallet route may be the best bet for your city.

Short term budget constraints should also be considered. A targeted approach to providing stimulus where it is needed most in the community (affected businesses, specific neighborhoods, etc.) may be the better option.

If you don’t have the resources to maintain a currency project, consider teaming up with a third party that can apply for state or federal grants to fund the targeted currency approach.

Aide to the local economy in times of rising unemployment

With a boom of city-wide digital currencies popping up in the wake of the 2008 financial crisis, including the Brixton and Bristol pound, one could expect a resurgence as local governments across the world respond to the economic impact caused by the COVID-19 pandemic.

Local currencies have received praise for their ability to ‘prop up’ the economy in times of unemployment, as currency can be earned $ in some cases through charitable work$ , such as volunteering. Points earned or currency, can be used to pay for goods and services from local food shops to childcare services and in $ some cases, healthcare$ .

Perhaps now more than ever, local governments may want to look at the unfortunate landscape as an opportunity to engage citizens who are in need of this support.

Additional Story Information

Regierungsbehörden

Ku

Kingston upon Hull City Council, GB

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United Kingdom

BC

Belfast City Council, GB

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United Kingdom

BC

Bristol City Council, GB

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United Kingdom

LB

London Borough of Lambeth, GB

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United Kingdom

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