Cross Exchange transactions in CC systems

Pro and cons of clearing between mutual credit systems

Lucas Huber

Community or corporate currencies (CC) have in most cases a strong inclusive aspect, whether from currency design or sometimes from social aspects or “local-chauvinism” (Barnes). In addition, it is hard to predict if larger scaled inter-exchange transactions could cause difficulties on the compliance side. Mutual credit systems are in fact designed to be different from the mainstream FIAT money and if they were freely convertible to $ or €, most of these currencies would just break down, because of a tremendous drain on liquidity and trust. Of course, such foreign exchange (FX) would generally require a banking licence, which is more or less impossible for CCs to acquire.

A different story is whether it is possible to make transactions between the same types of exchange. For example, in timebanks cross exchanges or clearing of different timebanks has been done for roughly the last seven years in the German speaking part of Europe. Also CES, the largest mutual time-based credit system worldwide, does provide an inter-exchange function between its local exchange branches.

The question is then not whether to have to have inter-exchange, but rather how to do it and under what rules. Another important factor arises when it comes to business-related currency systems such as WIR (CH) Sardex (IT) or Regiomoney. Here compliance needs are much more difficult to handle. Arguably, though, it could create some benefits if such clearing and settlements were possible or, as Graham Barnes points out: “The progressive centralisation of supply chains has often stripped out local economies and some goods and services may have no local supply at all. In this context, it is worth noting the success of some Trade Exchanges, where a group of ‘brokers’ are employed to proactively navigate the supply chain of participants and uncover new potential customers and suppliers. In the best of all possible worlds, local government should be interested in this activity, and in providing incentives for suppliers of under-represented goods and services to set up shop in the area. At present, however, they seem to be more preoccupied with FDI (foreign direct investment)—subsidising/bribing national/international brands to get headline incomers. This, despite the general acknowledgement that these companies are disruptive on the way in and disruptive on the way out of local economies, and that the lifetime value to councils of genuinely locally-grounded businesses is substantial. They also appear to prefer specialisation over diversity in local economies.” (Barnes, 2015)

Or as Martignoni (2015) sums it up:
“Pro cooperation of organizations:

  • It strengthens the individual organization and supports the whole movement.

  • It can get bigger markets for own products and services.

  • It can help to overcome the “critical mass” of participants for a currency.

  • A big network can support trustworthiness and safety of a currency.

  • It gets more resources by sharing them.

  • It can help to develop new forms of coops. Etc.

Against cooperation:

  • We need strong dams and borders against the “moneyflood” and today's wrong money. With interchange they will be weakened.

  • There are much greater risks of unbalance and abuse.

  • The easy to use interchange mediums already exist: use dollars or Euros to get anything.

  • The stronger will survive and the smaller will be merged, as always, and we won’t get away from troubling the world with inadequate money.

  • The risk of causing legal problems and judicial examinations will increase at least when the volume of interchange reaches a certain level.

  • Interchange between different kinds of currencies makes it harder to define the purpose and the characteristics of a specific currency. Etc.”

Besides the practical or regulatory considerations, obviously the technical challenge to operate a real time clearing (RTC) system for exchange is huge. Until now, only CES has introduced such a platform and they will migrate in a few months to a more contemporary software platform based on the CMS Drupal.

The solution is based upon the Community Forge Drupal modules named Hamlets, mainly developed by Matthew Slater. Sardex, the fasted growing mutual credit system, plans to establish an inter-exchange system with some of its clones in the rest of Italy, but that will take some time and is linked to a migration of their Cyclos version.

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