What are Regional/Local/Community Currencies?
Let's find out Regional/Local/Community Currencies meaning, definition in crypto, what are Regional/Local/Community Currencies, and all other detailed facts.
Regional/Local/Community Currencies are a certain type of currency that is specific to a geographic area. However, each of them differs in its own ways.
Community currencies are usually spent within that specific community. Local currencies refer to money being exchanged in a specific geographic area. On the other hand, regional currencies are connected to local currencies except this money is used in a much bigger geographic area.
The currency’s value can be determined by a variety of factors. Some regions equate their local currency to the state’s currency. While some smaller communities prefer to provide labor as a means of exchange. Therefore, forgery is something a local currency seldom has to face.
There are as many reasons for creating local currencies as there are local currencies themselves. Here are some examples of why they pop up:
- In order to support local businesses by spending only within the community, area, or region;
- Skepticism in regards to the legal tender. High inflation leaves people scrambling for different mediums of exchange. It’s particularly prominent in South America and has been around for hundreds of years;
- The belief within the community that the focus should not be on maximizing profit. Certain communities believe that by using the state’s currency they’re discouraging the interactions between members of said community. It’s more of a social reason that can have some positive developments like increased employment, local business promotion, and others.
It’s difficult to say what action the government will take as a result of a growing local currency. However, it’s clear that it can become a threat to the state’s currency.
It’s important to note that the originators of local currencies prefer for them to lose value over time. That way people won’t hoard the money.
This is where the crypto sector comes in where the communities can fix a certain amount of the local currency to a token. Blockchain technology offers a method of automating local currencies while also allowing them to slowly lose value based on a set rate.