Hull city council considering bitcoin-like currency

Hull invents its own cyber-currency. It sounds like an April fool’s day joke – it’s not.

The city council is looking to produce Hullcoins, which it could give out to people who do voluntary work. They can then use their Hullcoins to pay for rent, council tax, and even fuel.

The key aspect is that, currently, the government does not treat such virtual currencies as it does traditional money.

Hull’s Finanicial Inclusion Forum, which has been analysing the idea, believes that recipients’ benefit payments won’t be affected, and the income from Hullcoins won’t be taxable.

Virtual currencies have hit the headlines recently, mainly thanks to bitcoin. So how exactly are the online “coins” produced?

Most of them are generating by “mining” software: basically your computer is tasked with solving a difficult maths problem, and if it gets the answer right, it’s rewarded with a coin. Hull city council is considering using a similar system to mine its new coins.

Read more: bitcoin boom – is it already over?

It may sound like digital alchemy, but fundamentally where there’s demand there’s value, and demand for bitcoin is high – so high that each coin is now worth almost £300, compared to under a pound shortly after launch in 2011.

That’s the confusing thing about Hull’s proposal: for bitcoin there’s a trading market where the value of the currency is thrashed out (causing some wild swings in the rate).

But Hull city council would be the only authority issuing Hullcoins, and will therefore set the price.

Read more: bitcoin exchange Mt. Gox goes dark

Hullcoin recipients would also be urged not to trade them, so there’ll be no market to change the initial price.

Therefore, it’s not quite clear how this differs from handing out vouchers to people who do voluntary work.

Nonetheless, it’s an intriguing experiment, and shows the kind of traction virtual currencies are now gaining in the real world.

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