Tel Aviv-based blockchain company Colu announced the launch of its second local digital currency in the United Kingdom, named the “Local Pound, East London” (ELP) a digital currency pegged against the British Pound.
Colu believes that the key to supporting local businesses and creating an environment where sustainable and equitable economic growth is possible starts with people’s ability to exchange digital cash directly with each other. The startup maintains that the use of localized digital currencies leads to strong local economies as people utilize their spending power in their communities thus creating a profitable, peer-to-peer, closed-loop economy.
In a similar vein to a policy of negative interest rates, local currencies encourage spending and contribute to a higher velocity of money. The higher velocity of money can improve the cash flow of businesses, allowing them to plan their use of resources more effectively. One of the biggest problems with capitalism is driving money to productive uses and this is where local currencies may be useful. By stimulating spending at locally-based enterprises, this encourages them to improve their offering and absorb underutilized labor in the area.
On the other hand, local currencies are sometimes criticized for failing to achieve critical mass. Another criticism is that it complicates business as two separate ledgers are required, however with Colu’s Local Pound, East London, it is exchanged at one-to-one with the British Pound, avoiding this problem.
Amos Meiri, the CEO and co-founder of Colu explains:
“Colu is about building communities from the wallet up, offering a way for locals to infuse their money with meaning by supporting local businesses — a win-win for everyone.”
To achieve this vision, the startup has created app-based payment platforms that are both peer-to-peer and customer-to-business. The platforms allow for financial transactions through local digital currencies at places of business. The platforms enable users to acquire the local digital currency, which they can then spend at a business in their community.
By joining as a local, five ELP are given away to users. Also, every exchange from GBP to ELP comes with an additional ten percent, encouraging spending at local stores. The app plans to introduce bitcoin functionality, but at the moment, you can only get ELP via credit card.
Colu makes use of the Coloredcoins protocol, which allows assets to be traded and created on top of Bitcoin’s blockchain. A variety of merchants are participating and accepting the Local Pound, East London, including restaurants displaying the diverse ethnic makeup of the area, a perfume laboratory where you can create your own, unique fragrance, and a handful of clothing stores.
“Small businesses are the backbone of the UK economy, and an investment in local businesses is really an investment in the residents of East London. By introducing the East London Pound, we plan to change the way people think about money in the heart of the UK,” Meiri added.
In addition to creating the localized digital currencies and the app-based payment platform, Colu has other tools it believes will help local economies grow. The startup provides its partnering local businesses with a digital toolbox. This is a set of vital business tools that are designed to help the small businesses compete with the larger retailers such as a business dashboard that replaces the need for point-of-sale systems.
This is the second local digital currency that Colu has launched in the UK, with the first local digital currency introduced in Liverpool in late 2016. Since the release of the “Local Pound, Liverpool” more than 16,000 people and businesses in the city of Liverpool have been using the Colu app daily. The app is used in local places of business like bars, restaurants, fitness clubs and beauty shops.
Colu hopes that the ‘Local Pound, East London’ will have the same effects on the area’s local economy as in Liverpool. Meiri elaborated on the decision to target these areas in particular:
“I’m often asked why we chose to launch currencies in places like East London and Liverpool. It’s because these areas have a unique combination of intense community pride, trendy new businesses and a bustling tech scene, making them the perfect places to build a new digital, local economy.”
The startup is nearing 50,000 users worldwide who spend almost $1 million in Colu’s localized digital currencies at small businesses, through its payments application. These numbers reflect a willingness by both individuals and businesses to use the technology to boost their local economies thus creating communities with a strong sense of social responsibility as well as sustainable growth.