Thinking About Structure and Governance of Currencies, Barter Networks, and Time Bank

This pages contains a list of questions and considerations in thinking about how to structure a currency project.  See Choice of Entity & Tax Exemption for general info on the different entity options for currency projects, with a specific focus on seeking tax exemption under 501(c)(3) and 501(c)(4), and links to further resources on cooperatives. Also see Participatory Governance Models, a page from SELC’s CommunityEnterpriseLaw library that discusses questions to help determine what governance model makes sense for your situation, and provides a couple models of governance.

Three layers of choices to make:

1. What entity to choose: The entity we choose to form at the state level will dictate certain limits and possibilities for how the entity may operate.

2. What tax status to obtain: The tax status or tax exemption we choose will also confer certain constraints and benefits on the organization.

3. How to structure governance, operations, and financial provisions: Beyond the constraints imposed by choice of entity and tax status, most organizations have a vast amount of latitude to choose how to structure governance, day-to-day operations, member rights and responsibilities, and management of an organization’s resources.  The choices we make are then reflected in how we draft bylaws, operating agreements, and other organizational policies.

Who are the Stakeholders that a Currency are Designed to Benefit? 

• The mission, vision, and values may partially answer the question: To answer the question of how currencies should be governed, perhaps we must first answer the question: Why would we want to have a complementary currency and how should they fit into a larger economic transformation?

  • Mutual benefit? Should those stakeholders control the currency for their mutual benefit?

    • Think about: Cooperatives or Nonprofit Mutual Benefit Corporations

  • Public benefit? Or should a financially disinterested group control the currency for the benefit of the broad public?

    • Think about: Nonprofit Public Benefit Corporations (501c3, 501c4, or not tax exempt)

Factors for Building a Successful Currency 

• Knowing what makes currencies successful may partially answer the question: What does it take to build a critical mass of users and transactions?

  • How important are factors such as:

    • High levels of member engagement in developing and governing the currency?

    • A strong sense of community among members?

    • Trust in the integrity of the system and the community?

    • Trust in the long term sustainability of the currency?

    • Clear and efficient administration of the currency?

    • High levels of transparency?

    • Protection of privacy?

    • Access to clear conflict resolution procedures?

    • Policies that are clearly and equitably enforced?

    • Legal enforceability of member rights?

  • When do these factors conflict with each other? For example:

    • High levels of engagement in decisions   v.    Efficiency of operations

    • Trust built upon a strong sense of community     v.    Highly formal rules and procedures

    • Transparency and broad access to information     v.    Protection of member privacy

    • Keeping administration simple and inexpensive   v.   Investing in administrative capacity

Recent Trends For Currency Organizations

• What do we know about existing currencies, barter networks, and time banks?

  • Fiscal sponsorship is a bit awkward: Many are fiscally sponsored by 501(c)(3) nonprofits public benefit corporation, meaning the board of the fiscal sponsor and the individuals signing the fiscal sponsorship agreement have significant control, at the end of the day.

    • Think about: But does it make sense for every time bank to form its own corporation?  Would it make sense to have a central organization hold the reigns?  A parent organization with chapters?

  • What the IRS thinks: The IRS is increasingly denying tax exemption applications, viewing such organizations as operating for the mutual benefit of members, as opposed to the broad public.

    • Think about: Should we just go with the IRS flow and more toward mutual benefit structures?  But what if the best source of funds are grants and charitable donations?

  • Private ownership: Some are privately controlled and operating for a profit.

    • Think about: What would be some dangers of having a non-democratic and privately owned business to operate a currency? What have we seen happen in the past?  It’s one thing to allow currency founders to make a livelihood through their efforts; it’s another thing to allow them to profit without limit.

  • Is it possible to have completely decentralized currency? In other words, can you create a currency or time bank that has no organization handling the administration?  Is that sort of what Bitcoin is?  But is there a person or group of people that could manipulate the Bitcoin software to change supply of, value of, access to, and records associated with the use of Bitcoin?

Some Questions a Currency Organization Should Answer

• • Who elects the board of directors? Board-elected board or member-elected board?

  • What is the division of power between the board and members?  What are the rights and responsibilities of directors?  Of members?  When can members invalidate board action?

  • What are avenues for member participation and influence? How can members take part in suggesting new directions for the organization?

  • Can the functions of the organization be delegated into semi-autonomous committees?  Does the board create committees?  Or do the members create the committees, then seek board validation?

  • How are meetings held and how are proposals brought, considered and adopted?  Who can bring a proposal, when, and about what?  Is there a clear process for exploring the proposal?  Is it adopted by a majority?  Supermajority?  Consensus?  By holacracy procedures?

  • Administrative needs: What are the development / overhead/ administrative needs of a currency and who is responsible for that?  Could those functions be contracted out while the members maintain autonomy and ultimate control?

  • Transparency: How can the organization quickly and clearly communicate governance structure, rights, and responsibilities to new members?

  • Who controls the issuance and supply of the currency, and how might that play into decisions about governance?

Other Food for Thought

• Are there strategies for creating high levels of member engagement and fostering a sense of “ownership,” without undermining the efficiency of the organization?  Are holacracy and sociocracy models for this?

• What could be the role of a centralized trust or federation of time banks and currencies?

Other Research Questions:

To Research: Vermont authorizes a specific kind of corporation to form for the purpose of issuing local currency? Need to research.

 

Resources on Currency Organization Governance

McLeod, Andrew. Time Bank Governance: Cooperative Lessons for Complementary Currencies. Capstone Project, Master of Management – Co-operatives and Credit Unions. Sobey School of Business, St Mary’s University, Halifax, Nova Scotia. 2012.

Abstract
Currency is something that is used as a medium of exchange, recognized as valuable
by all who use it. Modern economies often run on some form of fiat currency, which
is understood to have value simply because someone with power – usually the
government – has declared it valuable.

In reality, fiat is not so simple. Once established, a successful fiat currency must be
governed, whether that is by decree of the emperor or by cooperative action among
participants. Currency must also be managed to ensure day‐to‐day functioning and
the cooperative models of subjecting management to democratic member
governance and organizing networks into formal federations provide useful lessons
for those who seek to create and maintain currencies.

hOurworld is a worker cooperative that has developed software for time banks,
which are a particular type of complementary currency (e.g. it complements the
national currency) that uses online exchanges to track transactions between
members. This group of self‐described “social architects” has also been exploring
the issue of governance for those time banks.

Governance is the part of decision‐making that addresses longer‐term policy. It is
often conducted by aboard of directors, and is the counterpart to the shorter‐term
execution of policy that is the responsibility of management.

This paper will thus focus generally upon the need for clearer time bank
governance, and specifically upon how hOurworld can contribute to the
development and spread of best practices at both the local and network levels.

Governance is examined at two levels: First, each local time bank, or “exchange,”
must necessarily have its own systems of governance, whether that is a formal and
elected board of directors or deferral to an unelected founder. Second, the decisions
made by numerous local exchanges produce diverse forms that need coordinated
governance to grow as a movement. Network governance is already being
discussed, but I propose that it will be productive to model these networks after
cooperative federations.

I use the experience of the Great Depression’s “self‐help cooperatives” to offer
guidance for contemporary time banks. This earlier movement provided important
service to its members by helping them trade when money was scarce, but it was
ultimately unable to create clear, consistent and durable forms of governance.

I hypothesize that clear and accountable governance will improve each time bank’s
chances for survival and growth, while stronger inter‐exchange governance system
will assist overall development of time banks through providing better coordination
of services and an effective venue for building the movement’s identity. And finding
that unclear and unstable governance contributed to the downfall of the self‐help
co‐ops, I make recommendations for how time banks can avoid a similar fate.