The Spanish Digital Currency Wars

Madrid and Barcelona — Spain’s two main cities — are major rivals.

Much like Sydney and Melbourne, they are in constant competition.

Bring up the issue that Madrid has better shopping — and tourism…and culture…and food…and nightlife…living…you name it — with a Barcelonian (or vice versa) and you are sure to spark endless discussion.

And, nowhere is this rivalry clearer than in sports…yep, I’m talking about football.

Think Lionel Messi versus Christiano Ronaldo. The Real Madrid–Barcelona rivalry has turned into a classic, literally. The ‘classic’ draws in viewers from all over the world.

Which city is better?

Well, it all depends on who you ask.

But there is one thing these two cities agree on: they both want their own digital currency.

Madrid is already studying how to develop its own crypto project.

Barcelona is a bit ahead of the game on this one. It started its own cryptocurrency last week.

The REC (Recurso Economico Ciudadano or Citizens Economic Resource) is Barcelona’s new coin.

The name comes the Rec Comtal, an irrigation channel that supplied water to the city. The idea is that the new coin will make the city flourish much like the Rec did.

REC is completely digital and based on blockchain technology. It has no costs and transactions are instant.

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How Barcelona’s new digital currency works

The way REC works is you download the app, exchange your euros for RECs and use them to pay through your phone or a card with a QR code. Anyone with a smartphone (Android at this point in time) anywhere in the world can download the app.

According to the REC website, ‘It is a citizen exchange system complementary to the euro, allowing transactions in a community between individuals, institutions and businesses that accept it. It provides an alternative to the globally dominant financial and monetary system.

With REC, Barcelona is looking to strengthen its local businesses. It sees REC as a way to keep money in the neighbourhoods and to encourage users to spend their cash in local businesses rather than larger chains.

You see, local businesses are losing the fight against online and super stores, which means closing stores, deserted neighbourhoods, increased insecurity and more city costs.

The project starts with about 42,000 RECs in circulation and 86 local businesses accepting them. It will be on trial for a year.

But RECs are a bit different from traditional cryptos. They are something known as alternative or social cryptocurrencies.

The digital coin will run parallel to the euro and will exchange one to one, which takes away volatility. 

And, it is not for profit. What I mean is, only registered businesses can exchange RECs back to euros. Users cannot exchange them back to euros, they can only exchange them for goods.

Barcelona is by no means the first city to think of this. Bristol, Nantes, Berkeley, they all are in different stages of developing these.

What are the benefits?

Obviously, there are great benefits for local businesses. More trade, more customers, more loyalty. The money stays in the neighbourhood.

For users, it is a great way for people to get more familiar with blockchain and to know that they are investing in where they live.

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Why do more cities want their own cryptocurrency?

For cities it is a way to get funding, at a time when funding from central government may be scarce.

Take Berkeley’s crypto for example.

As Citylab recently wrote (emphasis mine):

Berkeley’s cryptocurrency, for example, is meant to offer citizens an easier way to buy municipal bonds, which could help the city build affordable housing, rebuild transit systems, and support social services.

It’s still in its proposal and development stages, but if implemented, it would be “like a non-profit, special-purpose vehicle, meant to fund social good,” Berkeley Vice Mayor Ben Bartlett told CityLab in February. Instead of selling bonds to underwriters, who resell them to brokers and institutions at mounting prices, the government would sell bonds directly to citizens, who would essentially crowdfund each one. It’s a cheaper and easier system than traditional municipal bonds, and less volatile than traditional cryptocurrencies: The tokens would be digitized and blockchain-based, but they’d act as a security, not as a speculation tool.

The big benefit for cities is that they get rid of intermediaries, a.k.a. fees.

They create an alternative and more efficient way of funding by taking intermediaries out of the way.

And that is the whole point of cryptos. To make money more efficient by taking it away from big financial institutions and give people more control over their money.

Best,

Selva Freigedo,
Editor, Markets & Money


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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