Tales of Soft Money — Nicobarean Coconuts
Car Nicobar is a rather solitary, tropical island situated between India in the west and Thailand and Myanmar in the east. Paul Einzig, in his work 'Primitive Money', has summarized the documented use of coconuts as currency there. One of these sources is George Whitehead, British Government Agent on the island at the start of the 20th century. Whitehead wrote a full book about Car Nicobar, its people, and their customs, and it is freely available at archive.org on behalf of the Public Library of India.
Coconuts were for a long period of time the main staple food and drink on Car Nicobar. The lack of fresh water on the island caused the inhabitants to routinely drink from coconuts and then eat their contents. These coconuts were also the island's main export, and so important to the Car Nicobarese that they had seven words for it - one for each stage of the nut's development. In the foreword to Whitehead's 'The Nicobar Islands', Chief Commissioner of the Andaman and Nicobar Islands, R.C. Temple, noted:
They [the Car Nicobarese] will not cultivate cereals, because the coco-nut supplies practically all their needs, either directly or as an article of barter. Also, because it acts as a sufficient currency, they have no use for money as Europeans understand it. The coco-nuts are their money [...]. 
English zoologist C. Boden Kloss corroborated this claim as he set foot on Car Nicobar around the same time, at the start of the 20th century:
These [the children] are very helpful in climbing the coco palms for the nuts required for barter [...]. 
Under British colonial rule, many Indian and Burmese traders set up operation on the island. Their shops offered the islanders tobacco, rice, cloths, lamp oil, cutlery, pots and pans and other useful items, while taking only coconuts as payment (medium of exchange). Commodity prices were often quoted in coconuts as well, making it a unit of account also in most barter situations. And sometimes wages were denominated in coconuts. Slightly worse was this currency's store of value capabilities. The foreign traders built safes consisting of open outdoor areas sealed off by palm leave fences, to store large numbers of coconuts in preparation for incoming trading vessels. These enclosures were at times looted by hungry pigs, who had strong enough jaws to open the coconuts.
The use of coconuts as currency was deemed slightly problematic by the British, who halfheartedly tried to infuse the island economy with Indian rupee silver coins instead. This was logical as coconuts deteriorated and thus silver could help the Car Nicobarese to dispose of their nuts at the moment they became ripe, instead of holding on to them for pure monetary reasons. The monetization attempts failed however, mostly due to cultural reasons, and rupees were sometimes used as jewelry instead. For similar reasons, many Nicobarese also accumulated mountains of debt to the foreign traders, and at some point millions of coconuts were owed on certain islands. Whitehead attributes this phenomenon to a general honesty among the population, and to their reluctance to decline offers of postponed payments to the traders. A certain "Mr Crow" (likely a name given to this specific native by British sailors in the past) complained about this to Whitehead:
They make us have the things. I don't want them; and I have no nuts now. Can't I send the things back again to the shop? 
Since the Indian Civil Code did not fully run on the islands, the traders had no legal way to obtain Nicobarese land or property in the event of a debtor failing to pay back his coconut-denominated mortgage. They instead had to rely on the general willingness to pay back. In any case, after seeing debt spiral out of control multiple times, the British authorities declared lending illegal and all purchases had to be made cash down. This policy was however not strictly enforced.
Coconuts continued to be used as money, and interestingly, they seem at first glance not to have been much affected by inflation:
Up to 1885, 500 coconuts were equal to 1 rupee. Later, the "parity" was 300. In 1901 the rate quoted in the Census of India was 100 per rupee. When it was decided after the First World War to impose an export duty on all goods exported from the islands, the exchange rate was officially fixed at 200 nuts per rupee. Subsequently the value of the rupee was reduced once more to 100 nuts, and later to 64. 
Car Nicobar was a possession of British India at this time, and unlike Great Britain, that part of the Empire was toiling under a silver standard. In the second half of the 19th century, the gold-to-silver ratio expanded considerably, and without digging to deep into why, we can assume a relatively high supply inflation was causing harm to the market price of silver. In the light of this, it seems the price of coconuts held its ground good compared to silver, which is quite remarkable considering the ease at which coconuts grew, and the physical complication of getting silver up from the ground. The explanation of the discrepancy lies probably in the fact that coconuts naturally deteriorate, so that while a silver coin physically remains the same over decades, a coconut ultimately looses all its desired properties as food and drink, and as money. Einzig ends his piece on the coconut currency by taking note of this apparent 'lack of inflation':
The coconut currency is never liable to be inflated, for if there is no adequate demand for coconuts when they are ripe, then islanders just do not trouble to collect them. Nor is there any evidence that the increase in the value of coconuts from 500 to the rupee in 1885 to 48 to the rupee 40 years later - an appreciation of 900 per cent - has in any way upset the primitive economy of Nicobar. They just think in terms of coconuts, and if the rupee costs less coconuts then so much the worse for the rupee. 
The silver price fell, while counterfeit silver seems to have been ripe among the traders, who passed on cheaper German metal cutlery as silverware. Einzig, however, misunderstands the nature of a coconut currency. It was always liable to be inflated, in two ways as I just mentioned; it just happened to be that alternatives like silver were rather unsuitable during the time period that he studied. Coconut deterioration is a form of inflation the islanders could not escape. And as soon as coconuts hypothetically accrued a monetary premium, it created an incentive for producers to plant more trees to increase future supply. Since this was not that hard to do in the tropical climate of the islands, coconuts could never be hard money.
 Whitehead, G. (1914). In The Nicobar Islands. London: Seeley, Service & Co. Limited, p.9.
 Kloss, C.B. (1903). In The Andamans and Nicobars. London: John Murray, p.59.
 Whitehead, G. (1914). In The Nicobar Islands. London: Seeley, Service & Co. Limited, p.81.
 Einzig, P. (1949). Primitive Money: In its Ethnological, Historical and Economic Aspects. London: Pergamon Press Ltd., p.102.
 Ibid., p.103.