Can co-ops lead a money revolution through digital currencies?

Across the world alternative currencies are gaining momentum as they continue to challenge the traditional money system. Based on a peer-to-peer technology (P2P), with no central authority or banks, they are sometimes referred to as co-operative currencies. And while they are not linked to the official co-operative movement, which at this point does not have a currency of its own, many alternative currencies aim to promote the social and solidarity economy, including co-operatives.

The idea of businesses issuing their own currency was explored by economist Friedrich Hayek in his book The Denationalization of Money, in which he advocates a system of private currency. Some economists criticised Hayek’s approach saying that his regime of competitive moneys may result in the establishment of a new monopoly similar to the existing system. But, as people-centred enterprises, could co-operatives bring a new approach to the debate?

The first digital currency released as open-source software in 2009, Bitcoin, has become a global phenomenon. With no inflation or central authority to manipulate it, the digital currency is a way for people to move value across borders. Digital currencies use encryption to secure transactions and circulate units. Through a process of cryptography, every transaction is checked against a public ledger on a P2P network. As the code underlying Bitcoin was open source, soon other digital currencies derived from it.

One of the supporters of alternative currencies is Greece’s finance minister, Yanis Varoufakis. “The technology of Bitcoin, if suitable adapted, can be employed profitably in the Eurozone as a weapon against deflation,” he wrote in a blogpost in 2014. According to some Greek newspapers, the minister is also considering adopting the Bitcoin if negotiations with Eurozone officials fail. While Bitcoin remains the most popular alternative currency, there are many other currencies in use including Amazon Coins, Starbucks Stars and BerkShares.

In his book The Future of Money, Professor Bernard Lietaer highlights how co-operative currencies have grown from less than 100 in 1980 to 4,000 today. “The emergent co-op currency movement needs to grow up,” he writes. Prof Lietaer explains how the current financial system encourages individual accumulation. Co-operation can be used to induce currency to interact with neighbours, take care of the elderly or broaden the learning horizons of children, he writes.

Non-conventional money also includes local community currencies such as Time Dollars, Ithaca HOURS or the Bristol Pound. Around 39 communities in the US have followed the example set by Ithaca,  New York, creating their own paper currency, redeemable only within the community.

Another example is the garbage-recycling currencies used in Brazil since the 1970s. At a global level, the Plastic Bank is turning plastic waste into a currency to help reduce global poverty and plastic waste. Founded in 2013 as a social enterprise, it sets up exchange centres for plastic waste in areas that have high amounts of poverty and plastic

pollution. In this way the plastic becomes a currency the recycler can use to buy different goods.

Mutual credit currencies are another example of co-operation in action. Unlike national currencies, they are not scarcity based. If one person performs a service of one hour for another then the person receives a debit for the same amount. By agreeing on a transaction, people create the currency. In the UK, Local Exchange Trading Systems are local community-based mutual aid networks where people exchange goods and services with one another, without the need for money.

In Japan, Fureai Kippu (Caring Relationship Tickets) were especially designed for elderly care by the Sawayaka Welfare Foundation. Since 1995 these have acted as a sectoral currency enabling people to earn credits helping seniors in their community.

Timebanks are based on a similar concept. They are part of a larger movement to create co-operative currencies that link unused resources with unmet needs. There are timebanks in 34 countries, while the founding organisation Timebanks USA is part of a global movement. The currency used is time: an hour for an hour, with everyone’s time valued equally.

It is recorded in an online database and service provision is tax-neutral. As a timebank member you can decide what service you are willing to offer and provide that service for another member at your mutual convenience. You earn credit for time spent and then use that credit to get a service from any other member. As enterprises rooted in their local communities, co-ops are already championing volunteering. Co-operative timebanks could enable members and customers to help each other.

It is yet to be seen whether these currencies are prototypes of an emerging market revolution, as argued by Prof Lietaer. But it is worth exploring whether the co-operative movement can play a role in this process.

Read more: How are digital currencies are boosting the social economy in Catalonia?