What Sardinia can teach us about the use of crypto in the UK

You’d be forgiven for thinking that a crypto, is a crypto, is a crypto. Still, there are systems out there that use something other than fiat cash as a medium of exchange, but definitely don’t use what we think of as cryptocurrencies.

There are crossovers between the two that are worth exploring. For example, these systems are focused on small areas, and one of the most impactful uses of crypto is in local areas to improve people’s lives. I’ve talked about Switzerland’s WIR before, so let’s take Sardex in Sardinia as an example.

Sardex is centered on Sardinia, with only companies and individuals within this area eligible to participate. Even if it is created in other regions of Italy, the various “unions” do not and cannot act – for lack of a better term – in the wider network.

To that end, all the effort spent in Sardinia stays in and is used locally. This retention of circulating money in specific areas has long been recognized as one of the drivers of growth for regional economies, going back several decades.

Two examples in the UK come to mind. The first is Norwich, which is far removed from any other big city, but has nevertheless retained a thriving ecosystem. Cash earned in Norwich – and brought in from outside, via the likes of Norwich Union – has ensured that the city has prospered.

Another example is Liverpool. The town had its own bank called Martins Bank until 1969, when it was acquired by Barclays. Part of Liverpool’s success the previous year was arguably Martin’s localized situation, with managers knowing their customers and reacting accordingly.

When Barclays took over – and Liverpool were already in decline for a number of reasons – localized knowledge degraded and lending decisions inevitably became more automated. Could the city have done better than it did in the 1970s, 1980s and 1990s with its own bank? Quite possible.

This brings us neatly back to Sardex. The member companies use a digital platform that allows them to give each other credit. A dentist can offer to fix a carpenter’s teeth and get paid in Sardex credits, and the dentist can then use the Sardex credits she’s earned to buy groceries from a merchant.

From there, the merchant can pay the carpenter to build new shelves in his store, closing the “credit loop”. Several transactions have occurred without anyone having to pay any actual euros to each other.

The system works by encouraging each Sardex business member to buy and sell their services using roughly equal volumes of credits so that their net balance remains roughly even. Each Sardex user negotiates an upper limit on how much debt they can get and how much credit they are willing to accept as payment. Each member’s credit status and limits are open for anyone in the network to see online, building trust and transparency.

Perhaps as important as providing the online platform and framework for credit accounting, Sardex actively helps members find trading opportunities. Sardex brokers monitor members’ online offers and accounts, looking for possible matches – for example, an olive oil producer and a grocer.

They contact potential counterparts and propose that they do business with each other using Sardex as a medium. There are different systems based on similar ideas – BBX and organization we’re involved with, and Bartercard come to mind – but they have slightly different rules and goals.

There you have it – hours of work or expertise are used as currency and Sardex is used to keep track. In reality, much of what cryptocurrencies do is on a much larger scale.

Within the system, people are happy to accept work in exchange for Sardex credit. Using a crypto like Bitcoin – and eventually Scotcoin – exactly the same concept can apply. So while Sardex isn’t a crypto, it works very much like one – and that’s an idea we should embrace in the UK.