The berlin pilot subsidy programme
We have chosen to kickstart the Berlin Circles economy by offering some businesses the possibility to exchange their CRC back into EUR under certain conditions as a way to eliminate risks for them and attract them even while the goods and services they can get for their CRC are still very limited.
This not only ensures there is an initial incentive for businesses to offer their products and services in the Circles network but also a way of steering what we would like in the network and what is considered valuable in the new economy we are working to bring to life.
We believe that this is an important measure allowing us to eventually reach the tipping point at which the local Circles economy will be big enough (meaning enough products, supplies and services are available in CRC) so that local exchanges (B2B loops) can evolve and businesses can use their CRC for paying their major expenses and therefore don’t need the EUR exchange anymore.
You might want to start building a Circles hub without a subsidy for these reasons. In this case you should bear in mind that in the beginning, there is only a very limited incentive for businesses to join Circles, and choose them well. We recommend finding out who is interested in Circles for social and political reasons, who is enthusiastic about Circles, open minded to try new things out and leave the beaten track, and economically well enough off to be able to bear the risk of losing income in EUR when selling for Circles. It might also be a good idea to start with businesses who already have relations and exchange things, so you start off with existing loops and trust in place.
The medium-term goal of the programme is to reduce the percentage of the partners’ income we exchange for EUR and provide an environment where spending their CRC for things they need is possible and attractive.
We are aware this is only one possible route to take when starting Circles. There are valid arguments against implementing a subsidy program: it might create dependency, it's an artificial economic environment, and it doesn't necessarily attract business partners with the best motivation - and it costs money.
We have developed clear procedures of decision-making regarding the criteria for entering the subsidy programme based on what we need in the Circles network and what our partners need for their businesses. These might be different for every hub and should be well defined.
We have also worked with a complementary currency expert tax advisor to develop our reimbursement system, using a data system to track each partner's transactions and issuing credit notes to the partners each month to ensure tax conformity. While we are stating clearly that we cannot advise businesses on tax questions, we nonetheless try to support them with our expertise and contact when tax questions occur.
We started the programme by offering up to 1.000 EUR/week or 4.000 EUR/month to be paid back in EUR. While trying this out, we found the amount was too high for our system to digest and reduced it to 2.000 EUR/month, as transactions of high amounts remain difficult with the current technology.
In our experience, the amount agreed on with the partner businesses has to take the capacities of the system, the number of active users (i.e. the amount of CRC issued in the network) and our administration into account. We have also worked with a complementary currency expert tax advisor to develop our reimbursement system, using a data system to track each partner's transactions and issuing credit notes to the partners each month to ensure tax conformity. While we are stating clearly that we cannot advise businesses on tax questions, we nonetheless try to support them with our expertise and contact when tax questions occur.
We have developed clear procedures of decision-making regarding the criteria for entering the subsidy programme based on what we need in the Circles network and what our partners need for their businesses. These might be different for every hub and should be well defined.
We started the programme by offering up to 1.000 EUR/week or 4.000 EUR/month to be paid back in EUR. While trying this out, we found the amount was too high for our system to digest and reduced it to 2.000 EUR/month, as transactions of high amounts remain difficult with the current technology.
In our experience, the amount agreed on with the partner businesses has to take the capacities of the system, the number of active users (i.e. the amount of CRC issued in the network) and our administration into account.
How does this practically work?
This way we can gain very important knowledge about the key performance indicators in the system, we can track what is important for the community in our basic income system, how the value flows look like, and so on. This information has a high scientific value and helps other communities in their work to start Circles hubs.
Businesses are paid in CRC for their services or products, they then send the CRC to the Circles Coop Wallet and we reimburse it in EUR.
WHAT IF TECHNOLOGY FAILS? We also experienced times when the system stopped working for a couple of weeks, and managed to find solutions with the partner businesses enabling them to proceed with their CRC transactions where absolutely needed. The way we made it work was to ask them to diligently take notes of their sales and customers and make sure they would get the CRC after the system went back to work. We recommend clear agreements with the partner businesses for these cases so as to avoid confusion and share the risks associated with this experiment.
