Make it real: the pathway from money to currency

Tagion
7 min readDec 20, 2024

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#5 in our series “On the money”

In the 4 previous posts in our series “On the Money” we have covered a lot of ideas and background when it comes to understanding money in a way that opens new paths towards cooperative finance. Overall, we considered this to be a comprehensive contribution towards your monetary literacy. There are a number of issues and ideas that we have not covered yet, but we will leave this for future posts. Please bring any area of interest, or questions that might have arisen through the series, to our attention in the Tagion community channels on Discord, or in the comments below.

For now, we want to look at the final, and arguably most important step in redesigning money: the concrete process of implementation of any new currency.

By now we hope you do not expect us to only consider the issues and approaches from the crypto crowd and regurgitate issues discussed there. With a broader view of what money can be comes a more differentiated perspective on what constitutes success for a given currency. Consequently, the trodden path of ICOs, airdrops and mining look ever more like a peculiar and often dysfunctional exception in the wider field of currency innovation. The success of bitcoin and a handful or other early projects might well be attributed to their “first mover” advantage, combined with a general lack of understanding when it comes to money amongst the general public, politicians and even so-called monetary experts.

Following the priorities distilled in previous posts, we see the intended purpose as the central element of currency design. But once that is determined, at least preliminarily, what then are the important points to remember when working towards launching a new currency, and what is the typical development path to follow?

How to make it real

To summarise the following in brief: the issues and questions any currency project is confronted with after the initial ideation are by far not limited to specific issues of monetary engineering. What takes up most time and effort in the practice of currency innovation is relatively similar to the elements and issues of most start-ups. This might sound like a relieve: starting a currency is not too different from starting anything new. Or it might be daunting to those you believed that it is simply a matter of “build it and they will come” :)

In a short while, we will be looking at those “generic elements” of implementation, like organisational set-up, legal and compliance issues (and here we are not only concerned with financial regulation), marketing, funding, and impact assessment. But first we have a look at the typical development path of a currency project. As we see it — and have witnessed and experienced it many times in practice — it is less straight forward than what general business-canvases and incubator-processes like to suggest.
This becomes obvious when reminding oneself, the purpose of any currency is to best serve the needs and ambitions of its user community. So, ideally it is designed and implemented not only “with them in mind”, but actually “with them around the table”. At least, and this comes back to the distinctions about narratives in blog #4), it is only when all stakeholders (not Hodlers) are brought into the process, that a currency be considered truly cooperative and ultimately facilitate the kinds of exchanges that the people in the targeted economy want.

from People Powered Money, page 91

Then, the typical process of designing and implementing a complementary currency looks much more like spiral movement, in which four mayor areas are dealt with iteratively.

This pattern is derived from experience, because the answers to each question — why, who, what and how — influence and change the answers given to the other questions. All four of those questions have been implicitly or explicitly introduced in the previous blogposts of this series:

Four cardinal questions

What? — refers to the monetary features determining what kind of currency it is going to be (the most important ones are discussed in blog post # 2)

Who? — the users for and with whom a currency is designed, but also the stewards of a project (regardless of them being entrepreneurial, informal or even governmental in nature) and their required partners and further stakeholders like regulators, evangelists, investors…

Why? — is of course the above-mentioned purpose of the currency (see blog post #3 for more on this)

And finally, there is the
How? — all the other elements important to bear in mind. The second half of this post will give an overview of those.

To make it a little more explicit: a certain monetary design (in the “what?”-domain), proposed by somebody in personal or official capacity, might require certain legal compliance measures. Those in turn might lead to a certain organisational set-up not previously considered (both of those would be in the “how?” domain), and when preparing this a new array of stakeholders might have to be engaged with (yes, that is the “who?”). But as we have probably all experienced in various other settings: involving a new set of people might lead to a remix of priorities and ideas that could ultimately shift the initial answer to the question “why?” from where this example started. This in turn, might demand an adapted monetary design and so on and on…

Let’s finish of this series by taking a closer look at the different elements in the “how?”-domain, so that we can better prepare our practical journey, or if we are not personally involved in monetary innovation, that we can appreciate the difficulties others in the field of monetary reform might face.

Organisational set-up & legal compliance

First, there is the organizational set-up. As any initiative matures, there might come the time where a legal entity is needed to embody and represent it. Some complementary currencies (like LETS or online tokens) get a long way with keeping it completely informal, but for many purposes this would be untenable. Associations, cooperatives, foundations, limited companies or partnerships, the array of possibilities varies from country to country and each option needs to be vetted against all the cardinal questions of currency design.

Of course, the organization set-up has a strong relation to the next element: legal requirements. For example, when administrators of a given currency need to be hired and contracts signed, an unincorporated group could not do that. Similarly, there are legal questions that do not only apply to currencies, but affect them just as much, for example around taxation, labor laws, insurance (those three are often evoked in the context of timebanking) and data protection and privacy which concern everybody that runs a modern website. But there might also be anal administrative rules, for example at public entities, that might govern what kind of currency a given user can accept in practice. All these, without even touching upon the financial regulations that are probably thought of first, when legal and compliance is mentioned in the context of complementary currencies. In that domain we can here only state that in most countries most forms are currency are legal and if a currency is not linked to national currencies (e.g. backing or guaranteed exchange) then most banking regulation does not apply.

Funding and marketing

Ironically, when it comes to the launch of a new currency, funding is also a substantial issue. Most expenditure that the planning, launching and operation of a currency requires needs to be paid for in other currencies, particularly at the beginning. So, in some form or another, funding needs to be procured. And obviously, this might again relate to the two first mentioned areas, organizational set-up and legislation. The (pre-)sale of currency units (ICOs) might have seemed like the sorcerer’s stone for a while, but also this route has proven to have its boundaries, not only in terms of legality.

The narratives explored in the previous post, around getting a currency accepted, have already hinted at the next domain important to consider: namely marketing. Even if a currency is co-designed with its future users, it is unlikely that there would not be potential or even need for growing the user base. And at least indirectly, other stakeholders might also benefit from well-prepared communication material because running a new currency often requires a good deal of education to garner support or lower hurdles.

Also to be included in this list would be the needed infrastructure like ICT systems for an electronic currency. But to the contrary of many currency initiatives, where the mention of words like “blockchain” or “token” falls mostly into the marketing domain, this is not the first question to look at, but probably one of the last. Only when most other areas have been explored and covered (purpose, function, form, set-up) will it make sense to select a digital system fit for purpose.

People Powered Money

There is more in depth information on all of the above in the publication “People Powered Money” from where the above sprial graphic has been gleened (and yes, this is written by the same author, if undiclosed in both cases 😊).

But for the purpose of our series “On the money” we will leave this post with the hope that two things have been learned:
(a) working on new currencies might by systemically necessary, ideally rewarding for all stakeholders involved, and definitely not an impossible or even illegal endeavor. But it is not straight forward.

(b) to navigate the complexities of the design phase as well as ensuring the longevity and positive impact of a currency, there is one cross-cutting theme to focus on: governance.

This is what we are currently concerned with in Tagion, and what the articles after this foundational series will deal with. If you are interested in being involved and bringing your view and voice into the process, join us on Discord now, or find other ways to Follow and Learn on the Tagion Website.

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Tagion
Tagion

Written by Tagion

Building an alternative monetary and financial system as a Commons with real utility

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