Government

What can governments do to address the banking crisis, remedy unemployment, poverty and ecological threats, and create conditions for sustainable abundance?

Business

How can time-tested currency innovations such as mutual credit systems help businesses of all sizes deal with cash flow shortages and monetary instability?

Community

What can communities do to leverage their untapped wealth and connect resources that would otherwise remain unused with needs that would otherwise remain unmet?

Research

What can scientific and academic research tell us about how to design and implement more effective and resilient monetary systems?

Currency Proposals

What types of complementary currencies could help us overcome current obstacles to the flourishing of our educational, energy, commercial, and other systems?

Home » Case Studies

The WAT System in Japan

Submitted by on May 21, 2010 – 1:01 pmNo Comment

This introduction to the WAT system is an excerpt from a longer paper by Mitra Ardron and Bernard Lietaer in which they offer ways of addressing some of the shortcomings of “peer-to-peer” currencies like the WAT.

The Wat system (described by Izumi, in a 2001 paper) is a peer-to-peer complementary currency system initially designed by Eiichi Moreno. It is used in Japan typically to allow for small businesses to issue IOUs (called WAT-ticket) to their suppliers. These suppliers in turn circulate them within an undefined community, until they are eventually redeemed with the issuing business.   It was described in detail in a previous ijccr paper (Lietaer 2004).  Conceptually, the use of someone’s IOU used by others as a medium of payment is not an entirely new concept: during a banking strike in Ireland, Guinness issued cheques which circulated as currency until redeemed in pubs. The main originality of the WAT system is that it is designed as a pure peer-to-peer system without any significant role for a centralized function.

The challenge for the Wat system, and similar peer-to-peer systems, is that the trust in the currency is based in the trust of the community that the business or person backing a particular WAT-ticket is able to redeem the ticket on presentation. This is why the WAT system is most successful in Japan among small, well-established businesses. Indeed, for businesses that are not well-known or for individual people wishing to issue a WATticket, there may be a credibility issue since the second or subsequent receiver of a circulating ticket may not know the credit-worthiness of the issuer. This has been recognized and one solution is an independent guarantor such as an NGO.  For example this is proposed in a paper on implementation of WAT and iWAT (its online version) for rebuilding villages damaged by the 2004 Tsunami. (i-WAT 2005).

Learn More