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Alternative currencies, part 1: local currencies

Free currencies, decentralised currencies and alternative currencies are becoming increasingly common both internationally and in the local economy. But what are they and what are they used for?

Since ancient times, parallel currencies have co-existed alongside official coins. These alternative currencies were often “necessity” currencies, intended to compensate for the scarcity of the usual currency, particularly during periods of instability such as wars or revolutions.

In New France (now Canada) under Louis XIV, coins ran out in the winter of 1685 when merchant ships deserted the frozen Saint Lawrence River, and France declared playing cards legal tender!

Necessity currency issued in Colmar in 1918

Contemporary complementary currencies and community currencies aim to favour local business and sometimes to create a social link.

Appearing in Le Mans in 1990, “Troc Temps”, which used Minitel telematics networks to manage the exchange of services between subscribers (for example a guitar lesson in exchange for some gardening), was undoubtedly the first attempt of its kind in France. It was directly inspired by Canadian LETS (Local exchange trading systems) from the eighties.

In Japan, Fureai Kippu (“Caring Relationship Tickets”) have been in use since 1995 based on the same principle. This unit of currency in this case is time, which is used to provide services for the elderly. It can be offered to family and friends or be saved towards your own retirement.

Hermes, a local exchange currency from Bordeaux

In France too, SELs (Systèmes d’Échanges Locaux — local exchange systems) are sometimes based on units of time (an hour for an hour), but each SEL has its own rules. Some prioritise the exchange of services while others favour the purchase of goods. The SEL directory currently lists over 600 SELs in the country.

The state does not always look favourably on currencies based on the exchange of services, criticising them for too closely resembling undeclared labour, but it is not opposed to community currencies. The latter restrict their use to a specific geographical area, guaranteeing that wealth stays where it is. The benefits are therefore two-fold for the local economy: to meet the legal requirement to possess one euro for every unit of local currency, organisations managing solidarity currencies use euros exchanged in the form of solidarity loans to companies and associations within the region.

Since 2007, the SOL Project, launched in France by an association bank, mutual insurance and Chèques Déjeuner (meal vouchers), have tried out various formats and platforms for solidarity currencies, both physical and electronic (Sol-Violette in Toulouse, Galleco in Ille-et-Vilaine, Eusko in the Basque Country etc.). The SOL Project is supported by the European Social Fund.

Eusko in the Basque Country

From time to time, local currencies are officially recognised by the World Bank. This has been the case with the WIR euro. The WIR euro follows the WIR franc, created shortly after the financial crisis of 1929. Virtually unknown to the general public, it is currently used by 60,000 Swiss SMEs, or one in five! As there is no interest on its investment, the WIR circulates quickly, particularly as the Swiss franc loses value due to inflation.
A number of local currencies use this form of spending incentive by means of depreciation mechanisms that have been required since the creation of money. This type of currency that automatically loses value over time is called a “melting currency”.
In part two we will look at cryptocurrencies, which fulfil a different function.

Cyrille Baron

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