Here is how the BerkShares local currency made its long-awaited leap to digital payments | Business

EGREMONT — Robin Helfand founded Robin’s Candy Shop in 2004, two years before the launch of BerkShares, the county’s local currency. But she never accepted payment in BerkShares.

Now she does, using the nonprofit’s new digital currency, which eases transactions. 

“It’s not only the right thing to do, it’s a smart thing for a business owner to do,” Helfand said.

BerkShares Inc. launched its digital app this year with a twist. Unlike some of the other players in digital currency — an often rough and tumble world where benefits are available, but the risks are great — BerkShares entered the market without selling its soul.

With the help of a company founded by a New York City-based lawyer, BerkShares digital currency reflects the nonprofit’s values of keeping money and goods circulating within the community and working with local banks.

“The way we describe it is we’re bringing the blockchain to Main Street,” said Susan Witt, the executive director of the Schumacher Center for a New Economics in South Egremont, referring to the term that is used to record transactions in bitcoin or other cryptocurrencies across computers in a peer-to-peer network. The Schumacher Center oversees the BerkShares program.

According to Witt, no other local currency has a digital app set up like BerkShares.

“There’s one in South Africa that’s using the blockchain,” she said. “But it’s not going through the banks.”

BerkShares digital app is fully backed in U.S. dollars by two local banks, Lee Bank and Salisbury Bank & Trust, of Salisbury, Conn., which operates three branches in the Berkshires.

BerkShares was founded as a local currency that could be used at participating businesses to keep money circulating throughout the Berkshire region. It was created to serve as a tool for community economic empowerment, and development toward regional self-reliance, according to its website.

That idea doesn’t fit with digital currencies, where banks and other traditional financial institutions are often bypassed.

“This is extremely innovative because it’s built a multipayment system on the blockchain but working with our local banks,” said Witt, who believes the system for BerkShares’ digital app could be used as a model for other currencies.

It took awhile for BerkShares to hit on the right formula for its digital app. In the beginning, engineers were interested in a different model.

“We had been approached by multiple crypto engineers who said we can build a digital BerkShares for you, but they were expecting to leap over the banks, in other words to exclude the local banks and make it a for-profit initiative,” Witt said. “BerkShares is a nonprofit. We feel currency should be a tool that serves a local community, not one that extracts profit for others.

“One of our conditions is that (the system) would work with our local banks,” Witt said. “The second condition was that the esthetics that we so carefully built into the paper currency featuring our local heroes through the artwork of local artists and highlighting some of our key natural resources be maintained, and that the nonprofit ethos that we had constructed be maintained. And that it would remain limited to the Berkshires, so that it wouldn’t be an app that mobile traders could come on.”

Enter Fennie Wang, founder and CEO of Humanity Cash, based in the New York City borough of Queens. Wang, who has worked as a lawyer with securities and regulatory agencies, came on board after a friend who works as the director of innovation for the International Red Cross told her what Witt was trying to accomplish.

“What I really liked about the BerkShares model is that even with the paper version they were working with the banks to hold the underlying dollar reserve so it was a one-for-one match local currency,” Wang said. “It was a regulatory sound model. If we could just lift that model into a digital framework.”

Instead of having a customer walk into a bank with federal dollars, Wang said the idea would be to create a “digital analog” where a bank account would serve as the tracking mechanism. “From that point forward, you’re making peer-to-peer transactions with the digital tokens,” she said. “It really functions as a form of digital cash.”

“The banks were a very, very important part of the equation,” she said.

There are pros and cons to digital currencies. On the plus side, transactions are faster, there are no fees, and there’s protection against fraud. The downsides include assets that are prone to volatility because digital currencies are not backed by a central bank, and not overseen by a regulatory agency.

Central Bank digital currencies are regulated and are issued by a country’s central bank. Virtual currents are unregulated, controlled by the developer or a founding group consisting of stakeholders that were involved in the process, according to investopedia.com.

Based on her experience in the field, Wang said digital currency creators don’t believe in either banks or regulatory agencies.

“They think that the Federal Reserve is corrupt; that the dollar is terrible,” Wang said. “There’s a huge ideological bent. The whole point of crypto is to create this alternative money that is better than the Federal Reserve and the national banking system.”

Sketching designs

Humanity Cash began working on…