In the Berkshire region of Massachusetts, residents don't just spend US dollars; they spend BerkShares. Launched in 2006, this highly successful local currency is designed to keep wealth circulating within the community. Over 400 local businesses accept the colorful bills, which are obtained at local banks at a 5% discount, incentivizing residents to buy from independent local merchants rather than national chains.
How the Discount Exchange Mechanism Works
At its core, BerkShares operates on a straightforward exchange system managed through partnerships with local community banks in the Berkshire region of western Massachusetts. Residents and visitors can walk into participating branch locations and exchange US dollars for BerkShares notes. The exchange offers a built-in incentive: five federal dollars buy five dollars' worth of goods, but exchanging ninety-five federal dollars yields one hundred BerkShares. When spent at participating independent businesses, each BerkShare carries the purchasing power of one US dollar, effectively granting the consumer a five percent discount across the board on local goods and services.
For the merchant accepting the currency, the system creates a financial choice. A business owner can take BerkShares back to a participating bank branch and redeem them for US dollars at the same ninety-five cent conversion rate, breaking even on the discount while having captured a sale that might have otherwise gone to a non-participating competitor. Alternatively, the merchant can keep the full face value by spending the BerkShares back into the local economy—paying local staff wages, purchasing supplies from regional growers, or hiring local tradespeople and accountants. This dynamic rewards businesses that integrate their supply chains locally rather than cashing out.
Historical Roots and the Schumacher Center
BerkShares was officially launched in the fall of 2006 through BerkShares, Inc., working in close collaboration with the Schumacher Center for a New Economics, a research library and think tank based in Great Barrington, Massachusetts. The region already had a rich history of experimenting with localized economic tools. During the late 1980s and 1990s, community leaders and merchants in Great Barrington tested targeted scrip systems such as Deli Dollars and Berkshire Farm Preserve Notes to help finance small businesses that struggled to obtain conventional bank loans.
In those earlier experiments, a local deli owner or a group of community-supported farms sold paper notes directly to regular customers at a discount to raise upfront capital for winter expenses or shop renovations, redeeming the notes in sandwiches and produce over subsequent seasons. Those localized scrip programs demonstrated that residents were willing to hold and exchange community-backed paper. BerkShares expanded this small-scale concept into a region-wide currency backed by US dollar reserves held in participating local banks, broadening the scope from individual storefronts to hundreds of independent merchants across Berkshire County.
Art, Security, and Regional Identity
Unlike informal scrip or basic paper vouchers, BerkShares notes were designed to meet rigorous security standards while celebrating the culture and ecology of the Berkshire region. The bills were issued in denominations of one, five, ten, twenty, and fifty BerkShares. Printed on special paper embedded with anti-counterfeiting security features and individual serial numbers, each denomination honors a historical figure with deep roots in the Berkshires.
The one-BerkShare note features Stockbridge Mohican leader Mohican Chief Konkapot; the five-BerkShare note depicts civil rights pioneer and sociologist W.E.B. Du Bois, who was born in Great Barrington; the ten-BerkShare bill carries novelist Herman Melville, who wrote 'Moby-Dick' in Pittsfield; the twenty-BerkShare note honors illustrator Norman Rockwell; and the fifty-BerkShare note celebrates women's rights leader Susan B. Anthony, who was born in Adams, Massachusetts. The reverse sides showcase regional flora, fauna, and landscapes, reinforcing a tangible visual connection between the money in circulation and the land it is meant to support.
The Logic of the Local Multiplier Effect
The economic philosophy behind BerkShares centers on countering 'economic leakage.' In conventional retail environments, money spent at national chain stores, corporate franchises, or online platforms quickly leaves the regional ecosystem, flowing to out-of-state corporate headquarters, national supply networks, and global investment funds. Because distant corporations rarely bank locally or hire local administrative services, each dollar spent outside the local network exerts minimal ongoing benefit to the surrounding municipality.
BerkShares are intentionally geographically bounded; national chains and online conglomerates cannot easily absorb or redistribute community scrip. By circulating a medium of exchange that can only be spent with locally owned enterprises, the currency strengthens the local economic multiplier. When a consumer buys produce with BerkShares, the farmer uses those notes to pay a local mechanic, who in turn buys lunch at an independent diner. The same unit of purchasing power turns over multiple times within the community, fostering mutual financial resilience among independent enterprises.
Legal Framework and Taxation Rules
A common misconception about local currencies is that they operate in a legal gray area or serve as a tool for tax avoidance. Under United States law, local paper scrip is entirely legal, provided it does not resemble official US federal currency, is not minted in metal coins (which is reserved exclusively for the federal government), and is clearly identifiable as private exchange medium. BerkShares function as an agreed-upon medium of trade backed by actual US dollar reserves sitting in escrow accounts at participating community banks.
From a tax perspective, transactions conducted in BerkShares carry the exact same legal and fiscal obligations as transactions made in standard legal tender. State sales taxes and federal income taxes must be calculated based on the fair market value in US dollars at the time of the transaction. Participating merchants record BerkShares revenues in their accounting books precisely as they would standard cash sales, ensuring that local governance and public services continue to receive normal tax receipts.
Modern Adaptations and Practical Hurdles
Despite its enduring reputation as one of the most successful community currencies in modern history, BerkShares faces ongoing operational challenges inherent to physical cash. In an economy increasingly dominated by debit cards, tap-to-pay terminals, and digital transactions, physical notes carry administrative friction for both consumers and business owners, who must regularly count, transport, and balance physical registers.
To adapt to shifting consumer habits, organizers have explored digital iterations and mobile app platforms that allow users to transfer digital BerkShares directly between smartphones and merchant terminals. Navigating payment infrastructure, financial software integrations, and merchant processing fees presents continuous technological hurdles, but the core objective remains unchanged: providing a modern, community-centered alternative that anchors wealth within the local territory.
Key takeaways
•BerkShares incentivizes local shopping by offering users a 5% discount on currency purchases at regional banks while retaining full dollar purchasing power at participating independent businesses.
•The project evolved from earlier localized scrip experiments in the region, such as Deli Dollars and Berkshire Farm Preserve Notes, supported by the Schumacher Center for a New Economics.
•Transactions using BerkShares are entirely legal under US law and remain subject to standard federal and state sales and income taxes based on fair market value.
•The currency is designed to combat economic leakage by ensuring purchasing power circulates repeatedly among independent regional merchants and producers rather than draining into distant corporations.