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Tucked away in the corner of the United Kingdom, the country of Wales has made plans to launch its own digital currency, the Welsh government confirmed last Monday.
The currency, called Celyn, would be a digital currency network to help businesses trade amongst each other without using the Great British Pound. Businesses could trade in credits, not cash, that would then be re-used in the local economy. There is no mention of it running on a blockchain.
Celyn is created by community interest company Circular Economy Wales, and is being awarded £100,000 from the Welsh government’s £4 million Foundational Economy Challenge Funds. It could boost the Welsh economy by £250 million over the next ten years, according to an event page by Circular Economy Wales. A consultation on the Celyn will begin at the Circular Economy Wales conference on November 7, with a proposed pilot due to take place in North Wales next year.
It could also relieve economic tensions created by Brexit—Britain’s unresolved exit from the European Union that could happen in as soon as two weeks. Circular Economy Wales has looked outside of the UK for inspiration. Its CEO, Eifion Williams, said that Celyn, which is mostly aimed at businesses, is based on the Sardinian mutual credit system, Sardex.
"Wales is similar to Sardinia in that SMEs make up 99 per cent of our businesses, so this has the potential to significantly boost our economy,” said Williams.
Indeed, Dr Paolo Dini, an R&D consultant on Sardex, will support the project.
"The fact that it is electronic makes traceability easy, which leads to tax transparency and ultimately better tax compliance," Dini told Decrypt.
"The (micro)economic advantages for participating businesses are mainly from the zero-interest working capital and the increase in number of clients arising from import substitution," he said.
A case study for crypto?
Wales isn't the only country looking to launch a digital currency; the Chinese government is planning to put its national currency, the Yuan, on the blockchain. But Dini doesn’t think that companies or governments thinking of creating their own crypto-networks have much to learn from either Ceyln or Sardex.
For starters, neither Ceyln nor Sardex run on blockchains. Why not? “At the moment a centralised relational database seems to work better for individual circuits,” says Dini. But he says that a blockchain approach, probably one based on Ethereum, could be valuable to link different circuits together, “especially for the formalisation of the organisational/legal aspects as a DAO.”
And the goals of Ceyln and Sardex are also quite different, according to Dini. Companies, for instance the Libra Association ”cannot learn very much from mutual credit because the objective of mutual credit is not worldwide market domination. Governments are a different story because their objectives are a stable economy and employment, and mutual credit helps both so there is more alignment in intent,” he says.
Yet Dini does see “the sociological monetary theory underpinning Sardex as very relevant indeed to a wider conception of money than what neoclassical economics allows,” he says.