Little over a decade ago, local currencies were being touted as the saviour of the High Street.
The concept was simple: towns and cities would print their own banknotes — emblazoned with images of local heroes — which could only be exchanged in those specific areas.
The brightly coloured notes looked as real as Monopoly money and many were sceptical about the necessity of the project.
Comeback: Local currencies – which proved popular in many towns and cities across Britain around a decade ago – look set to return in digital form
Still, the idea proved popular and local currencies sprang up in Brixton, South London, Bristol, the Lake District, Exeter, Kingston and Totnes — among others.
The notes could be spent in local cafes and shops where they would be given out in change to residents. Businesses embraced the scheme with gusto — more than 600 signing up in Bristol alone.
In 2021, however, the buzz has faded — in part due to the coronavirus pandemic, which has wiped out the use of cash.
Most currencies are out of circulation now and remain nothing but a novelty — a sparkly collector’s item resigned to scrapbooks rather than cash registers.
But are they on the cusp of a digital renaissance?
The pioneers of the Bristol and Brixton pounds certainly think so. Both organisations are experimenting with the possibility of relaunching their local currencies — this time on an app.
Gone are the eye-catching notes inked with the likes of former Brixton resident David Bowie and the Lake District’s Beatrix Potter. In their place will be a smartphone app that can be loaded with currency and scanned in local stores.
Out of circulation: A Brixton £1 note commemorating local hero Olive Morris, a radical political activist and community organiser who established the Brixton Black Women’s Group
Like the first incarnation, the project is designed to keep money in local economies and boost independent trade.
‘We want to move away from thinking of it as a form of currency and more like a digital token scheme,’ says Diana Finch who runs the Bristol Pound project. ‘It will be more like having lots of IOUs or gift vouchers in one local area.’
P erhaps controversially, the currency will be built on blockchain — the same technology behind cryptocurrency. Blockchain is a type of database which stores information in ‘blocks’ that are chained together, creating a permanent record of transactions.
Students gambling loans on Bitcoin
Under-30s are using credit cards and student loans to pay for high-risk cryptocurrency investments, according to research by Interactive Investor.
Experts have repeatedly warned of the dangers of investing in the unregulated virtual money.
And last week the Financial Conduct Authority banned Binance, the world’s biggest cryptocurrency exchange, from all regulated activities in the UK.
Yet a poll of 18-29-year-olds revealed that half of those who had bought Bitcoin had borrowed money to fund their investment. Just under a quarter had used a credit card, while 17 pc said they had invested their student loan.
And nearly half of those surveyed said they had never invested before buying cryptocurrency.
Myron Jobson, a personal finance campaigner at Interactive Investor, says: ‘Young adults using credit cards, student loans and other forms of debt to invest is a worrying trend.
‘We would never recommend using a credit card to fund investing.’
Guy Davies, a project lead for the Brixton Pound, insists his team is not creating the new bitcoin.
He says: ‘We have to be very clear about this — we are not building our own cryptocurrency.
‘Cryptocurrency works in opposition to pound sterling. But we are a complimentary currency that works alongside the pound — £1 equals one Brixton pound.’
While the Brixton pound is no longer in circulation, it is arguably the most successful version of the local currency. On Brixton High Street, shop owners and vendors all know of the project and talk of it enthusiastically — though none can remember the last time they physically handled a note. A pink Davie Bowie-printed note can still be bought on its website, which Guy admits function only as souvenirs. For the most part, the project has kept very quiet since it initially came out of circulation in 2019.
But recently it broke its relative silence to announce it had entered into a grant partnership with the Algorand Foundation — a technology company specialising in blockchain. Speaking of the collaboration, the Algorand Foundation says: ‘Entering the third decade of the 21st century, the usefulness of paper money has started to recede globally and the Brixton pound now needs to become a digital complementary local currency. Tokenization via blockchain technology is the only platform to deliver this shift to ‘digital money’ in a secure and trusted way.’
Guy says: ‘I’m sure there are lots of people asking, ‘What the hell has happened to the Brixton pound?’ But like the other local currencies, we’re working along in the background trying to plan our next step.’
For Diana, it’s crucial that local currencies learn from their initial failure. While the pandemic certainly exacerbated the Bristol pound’s demise, Diana insists the issue goes deeper than that.
She says: ‘In the end it just wasn’t accessible to a lot of people. We became a very exclusive club. It only really appealed to people who are of a certain background and education and age group who were already thinking more locally. Going forward, it shouldn’t be a case of who’s woke and who’s not.’
But not everybody is convinced there will be an appetite for a digitised local currency.
Digi dough: Most cryptocurrencies use Blockchain – a type of database which stores information in ‘blocks’ that are chained together, creating a permanent record of transactions
Laith Khalaf, financial analyst at AJ Bell says: ‘I imagine that as the world becomes more obsessed with alternative currencies like crypto, there will be some interest in a scheme like this. But it’s hard to see what the point would be. The whole point of digital currency is to globalise what you do with your money, not contain it to one area.
‘There is also an issue with the carbon footprint of a project like this. Blockchain has been criticised a lot for its negative environmental impact.’
Earlier this year Dutch economist Alex de Vries, the creator of the Bitcoin Energy Consumption Index, warned cryptocurrency could soon have a carbon footprint the size of London’s. This issue has been a key concern to Diana, who says the Bristol Pound is committed to creating a carbon-neutral currency.
But even so, Laith questions how the cost of the project could remain stable. He says: ‘If there are lots of transactions being made between currencies there will inevitably have to be some kind of charge to the consumer.
‘My view is that local currencies were a good bit of fun but it’s hard to see how they can work going forward.’
Both Guy and Diana admit the project is not without its difficulties. But both are adamant that local currencies can help save the High Street and keep money floating in local economies — something that will be needed more than ever after the pandemic.
‘It is one big experiment for us,’ says Guy. ‘We don’t know yet just how and when things will pan out. Even once we launch the app, we will need lots of financial backing to scale it up and make sure it works this time around.’