Local Currencies Can Keep Dollars in a Neighborhood
By Ron Kim
Every day, more and more family-owned small businesses facing high rents, minimum wage increases, elimination of tip wages and unreachable mandates are shutting down and leaving New York.
As a son of immigrant parents who ran a 24/7 grocery store throughout my childhood, this issue is deeply personal to me.
For the last few years, advocates have pushed for commercial rent stabilization to protect storefronts. However, this pushes new developers away from developing retail space and toward more lucrative corporate choices like Amazon storage centers.
In order to bolster neighborhood stores, we must go beyond commercial rent stabilization and create community-focused, local currencies that keep dollars in the neighborhood. Such systems reward people for shopping locally with tangible incentives that help them save money down the line.
Additionally, as seen in the United Kingdom and the European Union, they enable nonprofits to reward positive behaviors that benefit the community such as helping seniors or mentoring children for extra impact in those communities.
Consumers already use “point-based” currencies systems this way via credit card rewards, hotel points, airplane mileage and so on. However, these incentives drive loyalty to corporate brands instead of having a community impact.
What if we could do the same for local communities?
In places like the Netherlands, complementary currencies have proven successful in encouraging positive behavior — all while adding to the overall economy from the bottom up. In Ithaca, a digital local currency called Ithacash launched in 2015 as a successor program to the Ithaca HOURS, which ran from 1991 until around 2008. Ithacash took lessons learned from HOURS and has pioneered methods for running streamlined local transactions using cutting-edge cryptocurrency technology.
Perhaps the most successful example of a U.S.-based local currency is BerkShares, which have been used since 1995 around the Berkshire region of Massachusetts. With over 400 local mom and pops participating in the program, it’s been dubbed a “great economic experiment” by The New York Times.
Breakthrough technologies like Blockchain and Web3 add an important element to the equation, as they create the technological potential for exchanging dollars to local currency, and for converting these currencies between each other as well as back to dollars. Before these technologies existed, local communities like Ithaca produced their own printed local currencies or ran isolated digital systems, but there was no way for them to connect to one another at scale.
Local currencies would be invaluable to mom and pop shops. As beneficiaries, they would be incentivized to reuse that same currency and give back to the neighborhood. For example, if I use a hypothetical district currency, a Flushing Dollar, to buy groceries at the local store, that owner would want to use the same Flushing Dollar to buy lunch at a local restaurant, and so forth.
The overall goal is keep local currencies like the Flushing Dollar circulating within the community, spurring economic growth and creating new jobs in the process.
Big chain stores may have less interest in supporting local currencies, as they can’t use them for their corporate supply chain. However, they could also choose to view them as ways to give back to the communities where their stores are located. For example, they could make tax-deductible donations to local nonprofits or offer bonuses to their employees that wouldn’t make sense in the dollar-only economy. Either way, the money recirculates back into the local economy, which again, is the point.
Some may question the constitutionality of creating a form of currency that could compete against the dollar. I would argue we are doing the opposite. The dollar is already losing value in the global market, and people are recognizing that it may only be a matter of time until it loses its status as the world’s sole reserve currency, meaning the demand for dollars globally would fall drastically. This proposal focuses on lifting the economy from the bottom up by creating currencies that are continually reinvesting back in their communities.
Furthermore, we are imbuing in cryptocurrencies a deeper purpose by creating asset-backed currencies that represent and serve local communities. This is especially important as the existing cryptocurrency market demonstrates incredible volatility. We can use the same technology that has attracted hundreds of billions in capital to create more stable, impact-focused systems for Main Street.
For the next few months, I will be working with experts on this issue and my colleagues in government at the local and state levels to push for the first comprehensive community complementary currency program in the nation.
Assemblyman Ron Kim, D-Queens, represents the 40th Assembly district. This article was originally published in the Times Union.