Hometown coins: How community currencies are helping local economies

• Author:
• Author name

  Quantumrun Foresight
• October 27, 2022

Insight summary

Hometown coins, or community currencies, are emerging as a dynamic tool to boost local economies and showcase unique regional identities. While gaining traction, they face challenges like operational costs and integrating into mainstream markets. These local currencies not only encourage spending within communities but may also prompt changes in government policies and business models, stirring debates on their broader economic and social impacts.

Hometown coins context

Hometown coins, also called community currency, are local vouchers used at businesses or establishments that have agreed to accept them as an alternative to the national currency. The goal is to increase spending in the area’s economy. According to research published in OpenEdition Journals, thousands of community currencies have existed since the 1930s but have grown in popularity since the 2010s.

Hometown coins are viewed as a unique instrument for encouraging local trade in the face of globalization. Other advantages include allowing persons who don’t have access to paid employment to generate money through charity or other community activities, as well as providing a platform for a particular town or region to express its distinct identity. Community currencies can also complement spending power in places where disposable incomes can be unstable. For example, Kenya’s hyper-local Bangla Pesa is only used in one area of Mombasa to stabilize buying power.

Though community currencies are slowly growing in popularity, they have yet to enter the mainstream market fully. Part of this is due to a lack of understanding of running costs or an inability to provide digital platforms that cater more to everyday spending habits. Different countries are now taking unique approaches to solving these issues. For example, some communities are looking into cryptocurrency that allocates some of its earnings to local community programs. 

Disruptive impact

In August 2021, the cryptocurrency MiamiCoin was established to support Miami city’s projects. According to the coin’s press release, it’s a programmable city-based token that can help generate income for local governments. The cryptocurrency, created by CityCoins, has a circular life cycle. To acquire it, one must buy another digital currency token called Stacks (worth about USD $1 per unit) and use it to bid for MiamiCoin.

The city’s government will get 30 percent of all Stacks spent by miners. However, one major criticism about the crypto coin is that, unlike traditional community currencies, it has no use for actual financial transactions in Miami. For example, one can’t pay taxes or rent. Nonetheless, shortly after the MiamiCoin debut, CityCoin launched the NYCCoin and is working on AustinCoin and PhiladelphiaCoin.

Meanwhile, the UK has been one of the pioneers of community currencies. The country’s first hometown currency, the Totnes Pound, was launched in Devon by the anti-globalization Transition Movement in 2006. Additionally, in the UK city of Bristol, around 500 businesses accept the Bristol Pound, considered Britain’s largest community currency. Aside from enabling financial transactions, the Bristol Pound, launched in 2012, showcases the local culture and ideals.

For example, the currency’s One Pound note features a painting of protestors in the streets of a bohemian area battling against a supermarket chain moving into their neighborhood, based on the actual 2011 protests. Plans for new city-based money are being discussed for Glasgow, Cardiff, and Birmingham. Only the Bank of England is allowed to print legal tender, so community currency bank notes are technically vouchers that local businesses can opt to accept. 

Implications of hometown coins

Wider implications of hometown coins may include: 

• More cryptocurrencies developed based on local cities and communities. However, their value would depend on how much they can be used for actual transactions.
• More small towns adopting community currencies to keep revenues within the area and ensure funds go to local projects.
• Some newly established hometown coins ceasing to exist because of lack of support and high operation costs.
• Increasing partnership with open banking app providers to create specific platforms to support community currencies and make payments more streamlined.
• Some critics accusing hometown coins of promoting more inequality and exclusivity as cities vie to have the best and most prestigious currency.
• Cities introducing digital wallets specifically for hometown coins, enhancing local transaction efficiency and fostering community engagement.
• Local governments revising tax regulations to accommodate the rise of hometown coins, impacting municipal finance management.
• Enhanced local tourism through targeted promotions using hometown coins, directly benefiting small businesses and cultural initiatives.

Questions to consider

• Does your community have a hometown coin? How is it being used?
• How else can community currencies improve small cities and towns?