Making money: How to start your own currency

Future Finance showcases future trends related to the global financial system.

Story highlights

People across the world are using homegrown currencies to boost local economies

New technology enables local money payments by cell phone

Experts explain how to start your own currency

CNN  — 

What do David Bowie, the supersonic aircraft Concorde and Cassiopeia (a fictional tortoise that can see 30 minutes into the future) all have in common? They’ve all adorned the paper notes of local currencies.

All across the world, from hipster American communities, through colorful UK neighborhoods to small German towns, people have been using homegrown currencies to stimulate local spending and protect against economic uncertainty.

While the phenomenon is not new, the recent economic downturn and a frustration over a growing wealth gap seems to have led to a revival of such schemes. One economics think tank even sees them as a model way to build local business networks. Crucially, the emergence of new technologies is increasingly enabling some of the new currencies to shift from costly paper notes to electronic forms of payments using the internet or cell phones.

Although exact regulations vary from country to country, in most places there’s nothing stopping you from starting your own currency right now. All you need is someone else who agrees to accept it. But to make it a viable medium of financial exchange takes a bit more planning.

So, fancy making your own money? Here’s how to do it, according to those who already have.

Think why you are doing this. Before you start putting in your time, effort and possibly money into such an endeavor, you’ll need to work out why you are setting up a local currency scheme. Is it because you want to encourage locals to spend in independent shops? Support low-income and isolated community members? Strengthen your area’s social cohesion? People have launched local currencies for all sorts of reasons over the years, but the schemes that have stood the test of time are the ones that were clear about their goals and the kind of problem they were trying to solve.

What are local currencies?

What are local currencies?

  • “Local” or “complementary” 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 concept is that the payment arrangement 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 “positive multiplier” effect, keeping spending within the local area.
  • Source: Bank of England

    Gather a core team of people. At the beginning, your scheme will likely rely on volunteer work so you’ll need to surround yourself with energetic people who share your values. “You need a coalition of support and a wide range of people who are willing to put in their time,” says Tom Shakhli, manager of London’s Brixton Pound currency. “Some of it is exciting, some of it is quite boring, like looking at regulation, so you set up a kind of management steering group and put in a lot of hours.”

    As your team organizes, you’ll also have to decide on your governance model, according to your goals and local regulations. “We formed a non-profit organization that is organized democratically,” says Christian Gelleri, who set up the Chiemgauer currency in Germany. “That is very important to us – everybody who uses the local currency is a member of the organization and they can participate in the decision process if they want.”

    Take people with you. If your goal is to keep money in your community, then gathering the support of local businesses is crucial. You’ll need to make sure that small independent traders are involved from the beginning. Consulting them and making them feel part of the scheme early is key since these are the people you’ll be trying to help anyway.

    “The main stakeholders are the local residents and businesses that have goods that you need every day and not only once a year,” says Gelleri.

    Public community meetings can help generate interest and find allies, but one-to-one communication can be more effective.

    “You can’t do it by email or you can’t drop it in from the sky,” says Shakhli. “You have to talk to people because creating a new currency is based on trust – people will use it if they trust it and they are more likely to use it if they know the people behind it.”

    Be serious … but keep it simple. True, visiting shops and having one-to-one conversations can be helpful, but this doesn’t mean that persuading the public to put aside their good-old dollars for your shiny new notes will be easy. In fact, you’ll need to be prepared for reactions ranging from dismissive remarks like “this is just funny money” to accusations that it’s a con or get-rich-quick scheme.

    In response, you’ll have to convince people that you’re serious – possibly by putting your money where your mouth is.

    “We committed ourselves to backing every paper Bristol Pound in circulation with a pound sterling held in a trust account to which we don’t have access,” explains Chris Sunderland, co-founder and director of the Bristol Pound in the United Kingdom. “So if Bristol Pound goes bankrupt anybody holding a paper Bristol Pound could still get their money back.”

    Inevitably, you’ll also need to make the time to take people through the arguments why this isn’t just Monopoly money – but remember, asking people to use a different form of money is already a big step, so it’s best to shy away from complex financial explanations or overzealous rhetoric.

    “You need to keep it simple,” says Shakhli. “It has to be a simple currency, it has to be a simple marketing; you can’t market it as this kind of ‘this is going to save the world.’ We came up with a very simple message, that the Brixton Pound was money that sticks to Brixton and people understand that.”

    Run a design competition. Choose the denominations that you want to issue and then launch a community design competition to attract public attention. Ask everyone from professional designers to local school pupils to suggest which local figures they’d like to see featured in the paper notes. This will engage people and get them interested.

    Once the currency is printed, you’ll need to make sure that the paper not only looks right but also feels right, and ensure there are no problems with the serial numbers. Alternatively, if you go down the electronic payment route, you’ll need to put robust systems in place to make sure that transactions are absolutely secure.

    Raise money. A major obstacle you’ll face at the beginning is raising the necessary resources for printing, marketing and setting up exchange points. Crowdsourcing, public events and merchandise of rare notes and t-shirts can all help with this. Similarly, financial backing from the various stakeholders can be a big plus – in some cases participating traders pay a small annual fee, while elsewhere, businesses acting as sponsors are featured in the scheme’s promotional material.

    Getting local authorities on board can also be a major boost. In Brixton, for example, the council endorsed the local currency by giving out a grant to the scheme and by accepting it in payment of business rates.

    In general, building strong relationships with local authorities will not only help your scheme get off the ground but also give it an air of credibility, thus contributing to its longevity.

    So you’ve done everything right and launched your local currency … Now what? “That’s when the hard work starts,” says Peter North, author of “Local Money: How to Make it Happen in Your Community.” “You can’t really expect a business to be an advocate for a local currency – you need to do that yourself and that takes time and money.”

    Simply put, you cannot create the money and then sit back and expect people to use it. Instead, you’ll need to keep going out there, talking to businesses and helping them get the people they trade with to accept it.

    “It is relatively easy to launch a local currency,” says Sunderland. “It’s much more difficult to sustain it.”

    Shakhli agrees. “Everybody has a more convenient option – the national currency – so what you need to do is to think like an entrepreneur,” he says. “How can I be creative, how can I make my currency more desirable?”

    That could range from making your currency more fun to making clever use of technology. “In Brixton we’ve been using mobile phones for payments the last three years; the national currency isn’t using mobile phones yet really, so we are much more agile than normal money,” says Shakhli.

    For Sunderland, it’s all about building strong relationships regionally.

    “The key to getting to volume is actually the procurement of the big players in the city,” he says. “It is actually to get the local authority procuring services in Bristol Pound,” adds Sunderland. “And as far as people are concerned, it’s to make sure people can spend their big personal budget items in Bristol pounds.”

    It’s when this happens that some large-scale changes can take place.

    “Then you can move on to the next stage,” says North. “You’re starting to develop more local businesses producing more of the things you need locally – producing the food you need, the power you need, everyday things – and then you start to get more of a resilient local economy that can stand shocks,” he adds.

    “We haven’t got there yet; that’s a 20-year vision.”