A Magazine about the Hudson Valley’s local economy, published by Hudson Valley Current.

Bursting the Crypto Bubble

A Big Difference Between Local Currency

By Chris Hewitt

When Bitcoin was originally released, everyone was calling it a currency. In a way, it can be thought of as a currency (if it allows for trades to be made), but the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) no longer consider Bitcoin and other cryptocurrencies to be currency. The SEC recently released new regulations for cryptos, which identifies this relatively new phenomenon as an asset, like a stock. The speculative nature of cryptos, especially the recent spike in value, is vulnerable to market fluctuations and volatile activity.

Many people became rich virtually overnight by investing in cryptocurrencies. “I believe it’s a bubble,” said Ralph Principe, a real estate investor and former owner of a stock brokerage firm. “Nothing goes up like that without coming down.” He compares the sharp spike in crypto values to the Dutch tulip bubble, also known as Tulip Mania. This was a time in the Dutch Golden Age when the price of tulip bulbs rose so quickly that everyone wanted to join an investment club to get rich quick. Everyone was talking about the most fashionable tulips, which drove the prices up even further. Then in February 1637, the prices came crashing down and all of the people who bought into the bubble too late were stuck with bulbs that no one wanted to buy. When people talk about investment bubbles, they usually refer to Tulip Mania.

Fortunately we don’t have to worry about market fluctuations with the Current, our local currency, because it is not a speculative asset. The Current is regulated as a barter exchange, and the IRS calls our currency “trade dollars.” Barter exchanges are a very old concept, so the regulations surrounding them are very clear. One trade dollar has to be equal in value to the national currency, in this case the dollar. Although the Current is digital — with a website and app that keep track of transactions — it is not a cryptocurrency. The digital component is a bookkeeping ledger that allows all members to see what they’ve earned and what they’ve spent.

Since early 2014, Current members have exchanged almost 300,000 Currents, which continue to circulate in our communities since they can’t ever leave the area. Currents have what I call a perpetual multiplier effect; they will continue to move around our local Main Streets for as long as it exists. In other words, one person’s spending is another’s income, so the more we spend the more we help our neighbors, and the more they spend the better we do. This also happens with dollars, but they continually leak out of our communities to corporate headquarters outside the region.

I am beyond excited to live in an area with a local currency. Throughout history, communities with a local currency have been more resilient because they are buffered by fluctuations in the national economy. The Current is recession proof, which means that our thriving Main Streets can continue to flourish into the future no matter what happens in the country and world. I’ve always believed that we will become an example to the world of how to live well and share the abundance that’s all around us.

I know, I know—I sound like a broken record always talking about abundance. But let’s remember: money isn’t everything. We have the land, the water, plentiful food, rich soils, vibrant communities with stories, songs and laughter, and we have each other. I feel blessed. Happy spring.