Somewhere in South London, an organic grocery store is accepting payment for goods in a currency that is not controlled by the Bank of England, and that is transmitted by text from a cellphone.
What may be surprising is that it’s not another trendy store cashing in on the bitcoin bump. Instead, it’s a Brixton shopkeeper taking a local currency that has been in existence since around the same time Satoshi Nakamoto released his fateful paper.
The store is Brixton Wholefoods and its owner is Tony Benest, a 30-year resident of the South London neighbourhood. Benest recently signed up so that his shop could accept the local currency, the Brixton Pound, by SMS. He said:
“It’s an additional form of payment for people who don’t have a credit or debit card, or don’t want to get involved with the banks.”
The Brixton Pound is one of the United Kingdom’s best-known local currencies. It’s been available as paper notes since 2009 and is emblazoned with the faces of famous residents, like David Bowie. But how has the rise of bitcoin and other cryptocurrencies affected the South London denomination’s fortunes?
According to Brett Scott, a Brixton resident and author of The Heretic’s Guide to Global Finance, the Brixton Pound has become popular in the past year, but not because bitcoin has paved the way. While the Brixton Pound and bitcoin are both alternative currencies that don’t rely on the Bank of England, they attract users for different reasons.
“In reality, bitcoin tends to appeal to a very different crowd. Local currencies are all about building community ties, whereas bitcoin [...] is focused on preserving personal autonomy and personal wealth,” he said.
Leander Bindewald, a researcher on complementary currencies at the New Economics Foundation, also noted that because bitcoin and local currencies appeal to such different constituencies, the cryptocurrency hasn't translated into gains for local units of exchange.
"Bitcoin's big user community has never merged with a local community. [Local currencies] are intrinsically different from bitcoin," he said.
Bitcoin leads the way
For all the differences between something like bitcoin and the Brixton Pound, though, digital currencies may still be aiding the adoption of local currencies in an indirect way.
“Policy makers are realising that bitcoin is asking questions they can’t answer. In this case, it’s great because bitcoin is challenging the paradigm.”
Bindewald believes bitcoin’s prominence has helped push questions about regulation to the forefront for policy makers. The spotlight may be on bitcoin, but some of it is reflecting onto local currencies too.
“Policy makers are realising that bitcoin is asking questions they can’t answer. In this case, it's great because bitcoin is challenging the paradigm,” he said.
Tom Shakhli, who is the engagement manager for the Brixton Pound, agrees that bitcoin’s rise is aiding accepting of alternative currencies as a whole.
While Shakhli highlights the differences in user-base between digital cryptocurrencies and something like the Brixton Pound, a local currency, he admits that for the general public, both units of transaction are often lumped together. While bitcoin is rising in prominence, the Brixton Pound also gets more attention.
“We all fall under the same umbrella, which is alternatives to national currencies. We are all part of that family, I guess. Each one gives the other more credibility,” he said.
Shakhli takes it a step further. He predicts that digital currencies and local currencies will rise in popularity in tandem:
“I imagine in five years’ time, there’ll be some really popular digital currencies, and maybe 50 more local currencies in the UK. I think that’s a safe prediction.”
But it’s not all plain sailing for alternative currencies. As Bindewald points out, there are dangers for local currencies if they become too closely associated with bitcoin. Regulators may be tempted to treat all alternative currencies the same way, to the detriment of local currencies, although Bindewald notes that this is a plausible, although unlikely, scenario.
“There might be negative effects, if the regulation of bitcoin goes in such a way that all alternative currencies are thrown into the same bucket and then dismissed by the regulator,” he said.
The largest local currency economy in the UK is Bristol, where its pound is also heavily supported by the local authority. Bristol residents can pay their council tax in Bristol Pounds and the city's mayor has his salary paid in the local currency.
According to the New Economic Foundation’s Lindewald, local currencies and other alternatives are picking up momentum, not just in the UK but worldwide. One project he is working on is called TradeQoin, a network of small businesses in Europe that issue lines of credit to one another. Bindewald explained:
“There is no central authority issuing credit. This gives businesses more liquidity, cheaper credit and makes them less likely to fail.”
But for all the talk of global transformation through alternative currencies, it’s merchants like Tony Benest at Brixton Wholefoods who will ultimately deal with cryptocurrencies or local currencies as part of their daily trade.
In addition to taking electronic Brixton Pounds, Benest also watches the Keiser Report for bitcoin news. Still, he doesn't consider himself an alternative currency enthusiast. Far from it, he has deep-seated reservations about them.
“Bitcoin probably isn’t quite as convenient for a bit of local shopping. I’ve never even seen one outside of a television set [...] The Brixton Pound is a local gimmick. I don't think it makes much difference,” he said.
He pointed to Brixton Village, a trendy complex of restaurants and cafes in the area, as symptomatic of the problems with the local currency:
“The people in Brixton Village are very keen on the Brixton Pound. It’s a bit like a comment I read in an article about Brixton Village: ‘Saving the economy by people selling coffee to each other’.”
A look at the Brixton Pound
The Brixton Pound (B£) was launched in September 2009 and is administered by the Brixton Pound Community Interest Company.
When it was launched, it took the form of paper notes that were printed with the images of prominent locals, including the aforementioned rock star.
To deter forgers, the notes are watermarked, contain a hologram, and are embossed and numbered. They are sold at about seven local cafes, shops and other businesses around Brixton.
The idea behind the Brixton Pound is to boost the local economy by using currency that ‘sticks to Brixton’. It is meant to be a ‘complementary currency’ that is used alongside pounds sterling. The currency is valued at parity with sterling, except in some cases, where offers are made to users or merchants. The focus is on supporting smaller shops and traders who face competition from high street chains.
Users of the Brixton Pound are given access to special offers on locally sold products, while merchants are given publicity by the organisation that promotes the currency.
The organisation quotes research from the New Economics Foundation that found money spent with independent businesses circulates within the local economy three times longer than when it’s spent at a chain store.
Since September 2011, the Brixton Pound has also been available in an electronic form. Users can transmit the currency by sending an SMS text from a mobile phone to a merchant’s mobile phone. According to Shakhli, 170 businesses have signed up for the electronic Brixton Pound, while more than 250 businesses accept the paper version.
Merchants pay a 1.5% fee on electronic transactions, although Shakhli says that is cheaper than other payment providers like Mastercard or Visa. He adds that there are no additional subscription fees to accept electronic payments, nor are there costs involved in setting up point-of-sale machinery, such as card readers.
Lambeth Council, the local authority, has supported the Brixton Pound in a big way. The council allows local people to use the local currency to pay their business rates.
It also gives council staff the option to have their wages paid in Brixton Pounds. The authority is working on a borough-wide currency, called the Lambeth Pound, slated for release this year.
“The council has been very supportive from the beginning. There is a correlation between a successful Brixton Pound and a successful Brixton in general, so they think it’s been good for the area and want to support it,” Shakhli said.