Why Many Community Currencies Went Wrong? Examples of Failed Currencies

Why Many Community Currencies Went Wrong? Examples of Failed Currencies

Among huge numbers of Community Currencies, there are successful currencies and failed currencies. The definition of failure and success of a currency here is based on distribution amount and length of life-span as a rough standard. Currently Japan alone has over 600 types of Community Currencies, but many of them have been unsuccessful.

I described about successful Community Currencies in another article, and this time I will introduce some of the Community Currencies that did not go well in order to see the reason of the failure.

 

 

Examples of Failed Community Currencies

・EGG

EGG is a Local Currency issued in the Ginza shopping street in front of Shimizu station, Shizuoka prefecture. It aimed to rebuild the community and realize social well-being of the region, rather than seeking financial profits. They used plastic coins instead of paper money.

Originally, people in this shopping street have good relationship, and maybe they felt troublesome to use EGG, it was not established and ended unsuccessfully.

 

・LOVES

LOVES(Local Value Exchange System)is produced in Yamato city, Kanagawa prefecture in 2002. It was a Regional Currency of IC Card type (unit is LOVE). When it was initially issued, 10,000 LOVE was distributed for free to 90,000 citizens who wanted the currency. At the time, it had the largest number of participants in Japan. They could earn LOVE when they engaged in volunteer work or brought eco-bags to shop. In order to promote usage of the currency, they decided to reset (zero) the balance every year end.

There were few ways to use LOVE after receiving it as payment, and not many shops participated. And the system that all LOVE would be reset at the end of the year made people lose desire to collect LOVE.

 

・IPPO

A Community Currency “IPPO” was paper type money which was operated by NPO “YUYU” in Suita city, Osaka Prefecture. First, users of paid volunteers purchased IPPO by Japanese yen and paid it to the volunteer as service fee. The volunteer who received IPPO could use it in the local shopping street, and the shops could exchange IPPO to Japanese yen. No exchange fee was applied. It was introduced under the catchphrase “Regional Cooperation”, and they tried to raise liquidity so that the currency would widely spread in the market and would be used as a consideration for volunteer work, which is non-market transaction. However, IPPO did not penetrate in the area, and ended unsuccessfully.

The reason of low penetration was that users could not find the advantage of using “IPPO”, and shops needed to trouble to exchange IPPO to Japanese yen. They should have developed a system for users to continue using the currency.

 

 

What is the Point of the Community Currency Not to Fail?  

Most Community Currencies have ended without being rooted in the area. From the cases of many Community Currencies that failed, I will explain the points you should note so that you will not fail the Community Currency project.

 

・Expand Distribution and Continuous Usage is the Key

Currency will not spread unless the circulation volume increases. To make it possible, there should be enough users, available places, and continuous usage. It is important to create a system that matches the local community, based on those ideas.

 

・Does it have Attractive Advantages to Use the Community Currency?

It is difficult to expand the usage of the currency if the users don’t see attractive advantages to use it rather than using Fiat Currency. For example, you can think about Community Currencies with various systems which cannot be realized with Fiat Currencies, such as the currency which appreciates when you use it, or the currency which can be used for those fields where Fiat Currency cannot be accepted, and so on.

 

・Can Foreigners Use the Currency?

For those people who don’t have the Community Currency, it is difficult and inconvenient to use services that can be paid only by the Community Currency. For example, in regions where there are many tourists, the Community Currency should have a system to be used by those tourists. Otherwise, it could limit the financial activity within the region.

 

・Can it be Used for B to B Transactions?

One of the major reasons why a Community Currency does not flow well is that it cannot be used for transactions between companies. Most Local Currencies can be used between local shops, but it cannot be used between “Companies”.

It may increase the possibility of success if it can be used B to B and expand the distribution.

 

 

Conclusion

The reason why many of the Community Currencies ended unsuccessful was that the distribution did not expand. If the currency has convenience that it can be used not only in a specific region but also in other areas, the distribution amount will expand, and it can continue to be operated.