Local Exchange Trading Systems

Context

A few weeks back Telangana had introduced coupons or tokens in the Rukatpally Rythu vegetable market. These tokens were in denomination of Rs. 5, 10 and 20 and the objective was to boost cash liquidity in the wake of cash crunch in the country. When people enter the market, they can purchase coupons in exchange for actual cash and use them to shop. When they leave, the coupons can be redeemed for cash.

Discussion

This system is already in place at several places around the world including Bristol in UK, Chiba in Japan, Ithaca in New York etc. Each of them has an alternate to national currency for transaction of business. These systems are based on a well established practice called “Local Exchange Trading Systems” or LETS. This LETS system was first tried in 1980s in Columbia and Canada and since then has spread to many countries. Currently, there are more than 3000 such local currencies operating around the world. Some of these currencies have their local names such as: Bristol Pound, Hull Coins, Lewes Pound, Disney Dollars, Arizona Dollars etc. The idea behind these local currencies is to boost the local markets and allow liquidity.