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Theme fund: NGI0 Entrust
Start: 2022-10
End: 2023-11
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Taler for local currencies.

Free software banking backend for local currencies

This project is about extending GNU Taler’s LibEuFin software to make it suitable as a core banking system for local or regional currencies, in combination with the Taler payment system. The innovation comes from employing FLOSS technology, and having a centrally managed and yet privacy-preserving payment system.

Our focus will be on creating interfaces to allow regional currency administrators to control the platform, including account creation, controlling money supply, analyzing transactions, and setting of relevant policies. Additionally, we will support onboarding of customers, including offering them a way to trade fiat currency (e.g. EUR) for the local currency or vice versa (if permitted by the currency conversion policies of the platform).

We will work with cities and regions that have deployed regional currencies (or are planning to do so) to better understand their needs and adapt our plans according to their use-cases.

Why does this actually matter to end users?

Digital payments have become so commonplace that people pull out their card or phone to pay for their groceries, or use their banking app to shop online or to split last night’s restaurant bill with their friends. But the difference with cash money is fundamental: payment systems based on remote accounts are not very robust nor private. Instead of directly transferring money locally between buyer and seller, everything you do with a bank account has to go via one or more computer centres, through a vast payment system that never forgets.

Society deserves electronic payment systems that let people pay privately and safely. Taler is such a system. Using a cryptographic mechanism called ‘blind signatures’ (without introducing a cryptocurrency or blockchain), it functions like a ‘digital ATM’ that lets you pay as easily and anonymously online as you were to pay with cash. Unlike with vendor solutions like Apple Pay, Google Pay or Alipay, there is no company looking over your shoulder with every payment you make, and your bank cannot observe and store each of your purchases on a permanent record.

While ideally all popular payment systems would respect people’s fundamental right to privacy, there is a great opportunity for applying Taler’s privacy-by-design technology on a smaller scale: in local currency systems.

Local currencies are created in various towns and regions to strengthen local economies and limit long-distance transport of goods by providing incentives for transactions between actors from the same region. If such currencies are electronic, this helps the ease of distribution of the currency (no need to print and mail physical banknotes), and because shops are relieved from having to always change money. Moreover, the system is configurable, and can for example be tuned to discourage hoarding and therefore speed up the circulation of money.

Using Taler for local currency systems helps the local currency digitalise while simultaneously protecting or even improving the privacy of its participants. Rather than just catching up with the convenience of mainstream digital payments, it helps local currencies leap ahead.

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This project was funded through the NGI0 Entrust Fund, a fund established by NLnet with financial support from the European Commission's Next Generation Internet programme, under the aegis of DG Communications Networks, Content and Technology under grant agreement No 101069594.