Burlington Currency Project Examining New Statewide Electronic Credit System

Local Currency 'Burlington Bread' Is Launchpad

Developing Infrastructure First Priority In Planning Stages

December 2006

By Mike Reilly

The Burlington Currency Project, a nonprofit organization that created the local paper currency Burlington Bread in 1998, now hopes to develop an electronic mutual credit system that will link local currencies around the state and make it more feasible for Vermont businesses to participate.

Amy Kirschner, executive director of the Burlington Currency Project, predicts that if the system is designed properly, Vermont businesses will participate and the state's economy will benefit.

Burlington Bread represents what Kirschner calls "complementary," as opposed to "alternative" currency, in that it is not intended to replace national dollars. In much the same way, the planned electronic network should support and complement Burlington Bread and other local currencies.

"Paper currencies work well for consumer-to-consumer and consumer-to-business exchanges, but the electronic network is needed to promote business-to-business transactions," Kirschner says. She points out that the electronic system would also include credit- or debit-type cards for consumers.

According to Kirschner, the Burlington Currency Project believes the development of local, complementary currencies in Vermont can reach a threshold to support a separate legal entity to operate as the electronic mutual credit clearing system. This system would allow for the connection of multiple local currencies, such as Burlington Bread, and facilitate business-to-business transactions on a statewide basis.

Part of the Project's current planning process involves determining the best and most economical way to sustain an infrastructure, or central hub, to administer and maintain the expanded system. "Ultimately, it's a credit system, or a barter network that self-sustains through transaction fees," says Kirschner. "We are looking for the lowest rates that could work. If we can make it work with a transaction fee comparable to those of Visa or MasterCard, I think businesses will want to be on board."

Kirschner says that in such a system businesses throughout Vermont could accept local currencies from their customers, deposit them in the new electronic system, and use that system to order goods and services from business-to-business suppliers from around the state. The electronic network, says Kirschner, will "be similar to a barter network. This is a proven business model, and a huge industry."

Indeed, the Website of the International Reciprocal Trade Association (IRTA) notes that bartering systems have been effective ways for businesses to work together for centuries. Also known as reciprocal trade, commercial barter or corporate trade, IRTA reports these systems provide businesses a "proven method of increasing sales, conserving cash, moving inventory, and making use of excess production capacity," all through a commercial trade exchange or corporate barter company.

Kirschner states that while most barter networks are privately owned, "We're seeking to organize ours for community benefits." She points to a number of other North American projects, including "Calgary Bucks" in Alberta, Canada, but says as far as she knows, the Vermont project is the only one actually moving toward implementing combining a barter network with local paper currencies.

"It's exciting to be doing something incredibly revolutionary and also just not know the exact model yet, because it is so new," Kirschner says. She stresses that "this is a project that will be run like a business while benefiting the community," and that while the model is revolutionary, people should not make political assumptions about the effort.

"I think a lot of people hear ‘buy local' or ‘local currency' and classify the project as politically ‘left.' But if you examine the history and the economics involved, it's really incredibly conservative. It's 'take care of our own.'" Kirschner suggests the phrase "appropriate economics" to describe the system.

Kirschner says it makes sense that Vermont is leading the way in this effort. "Vermonters have a strong tradition of independence, and of doing it for ourselves." She also believes the Vermont brand has a strong reputation for quality with consumers. "This effort builds on Vermont's identity and is a plus for Vermont-made products. It makes it easier to buy Vermont goods and services and that adds liquidity to our economy." Kirschner cited a 2001 report on Vermont's trade deficit that concluded a 10-percent shift of Vermont's food purchases from out-of-state to Vermont-produced products would boost the state's economy by over $375 million and add over 3,600 jobs. This study, "The Leaky Bucket: An Analysis of Vermont's Dependence on Imports," was conducted by Doug Hoffer and Ellen Kahler.

Kirschner has been associated with the Burlington Currency Project since 2003, and she became its full-time executive director in mid-2005. She says the group's board of directors includes Melinda Moulton of Main Street Landing, Will Raap of Gardner's Supply, Rob Downey of American Flatbread, Abby Duke of Sugarsnap, and Dr. Robert Costanza of the Gund Institute at the University of Vermont. "We also have a number of community members and activists," she adds. "It's a good balance and a dedicated group."

Kirschner expects the planning and development stage for the electronic network to last from six to 12 months. The Burlington Currency Project is tapping the input of community members and membership organizations, as well as the business community during this phase. She reports "genuine interest" on the part of businesses, which she views as crucial.

"We need a critical mass of about 1,000 businesses and organizations on board to launch," she says. "Our experience with paper currency made us realize the limitations of trying to build a system one person at a time. The development process will enable us to build the foundation for a successful launch for the electronic system." As for a timetable for an operational electronic mutual credit system, Kirschner states, "I may be optimistic, but I think we could be up within 18 months. We are making some of this up as we go along since there's no specific blueprint. But I'm confident we have enough guidelines to do it right."