A complementary currency is a currency or

medium of exchange In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. The origin of "mediums of exchange" in human societies is as ...

that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies. Complementary currencies are usually not

legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in pa ...

and their use is based on agreement between the parties exchanging the currency. According to Jérôme Blanc of Laboratoire d'Économie de la Firme et des Institutions, complementary currencies aim to protect, stimulate or orientate the economy. They may also be used to advance particular social, environmental, or political goals. When speaking about complementary currencies, a number of overlapping and often interchangeable terms are in use:

local Local may refer to: Geography and transportation * Local (train), a train serving local traffic demand * Local, Missouri, a community in the United States * Local government, a form of public administration, usually the lowest tier of administra ...

or community currencies are complementary currencies used within a locality or other form of community (such as business-based or online communities); regional currencies are similar to local currencies, but are used within a larger geographical region; and sectoral currencies are complementary currencies used within a single economic sector, such as education or health care. Many

private currencies A private currency is a currency issued by a private entity, be it an individual, a commercial business, a nonprofit or decentralized common enterprise. It is often contrasted with fiat currency issued by governments or central banks. In many count ...

are complementary currencies issued by private businesses or organizations. Other terms include alternative currency, auxiliary currency, and microcurrency.

Mutual credit "Mutual credit" (sometimes called " multilateral barter" or "credit clearing") is a term mostly used in the field of complementary currencies to describe a common, usually small-scale, endogenous money system. The term implies that creditors an ...

is a form of alternative currency, and thus any form of lending that does not go through the banking system can be considered a form of alternative currency.

Barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distingu ...

s are another type of alternative currency. These are actually exchange systems, which trade only items, without the use of any currency whatsoever. Finally,

LETS A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated LETS) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community infor ...

is a special form of barter that trades points for items. One point stands for one worker-hour of work, and is thus a

time-based currency In economics, a time-based currency is an alternative currency or exchange system where the unit of account is the person-hour or some other time unit. Some time-based currencies value everyone's contributions equally: one hour equals one servic ...

Purposes

Current complementary currencies have often been designed intentionally to address specific issues, for example to increase financial stability. Most complementary currencies have multiple purposes and/or are intended to address multiple issues. They can be useful for communities that do not have access to financial capital, and for adjusting peoples' spending behavior. The 2006 Annual Report of the Worldwide Database of Complementary Currency Systems presented a survey of 150 complementary currency systems in which 94 respondents said that "all reasons" were selected, among cooperation, micro/small/medium enterprise development, activating the local market, reducing the need for national currency, and community development. Aims may include: * resocialisation and emancipation * lifeboat currencies * to increase financial stability * to reduce carbon emissions, by encouraging localisation of trade and relationships * to encouraging use of under-used resources * to recognise the informal economy * promote local businesses

Advantages

Some complementary currencies intentionally devalue rapidly (they are called Schwundgeld); this increases monetary circulation. The Miracle of Wörgl is an event that showed the potential of this increased spending through the introduction of a local currency known as

Freigeld As part of the theory of Freiwirtschaft, Freigeld ('free money', ) is a monetary (or exchange) unit proposed by Silvio Gesell. Properties Freigeld has several special properties: * It is maintained by a monetary authority to be ''spending- ...

. Local currencies also have the benefit that they cannot be spent abroad, and thus the

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

always keeps circulating locally, benefiting the local economy. Alternative currencies are reported to work as a counterbalance for the local economy. They increase in activity if the local economy slows down, and decrease in activity if the local economy goes up. As a commercial tool within a business, as opposed to a geographical social tool, a complementary currency can open a business up to a preferred source marketplace whereby they can sell their otherwise devalued or worthless spare capacity in exchange for the complementary currency. By selling their spare capacity (empty hotel rooms / under utilised staff hours / blank diary slots / excess stock) the business is able to harness the otherwise lost value gaining some key benefits such as improved profits, a stronger balance sheet, enhanced cash flow, more customers, and a growth in market share.

Disadvantages

Complementary currencies promoted as

local currencies In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community curren ...

which cannot be spent outside the community have limited use. According to professor Nikolaus Läufer's theory, the use of local currencies such as Freigeld can only increase economic activity temporarily. Lengthy use of a local currency will ultimately result in a decline in economic activity and lead to a destabilization of the economy. This is due to the increased circulation velocity of the money as the amount in circulation decreases (as currencies as Freigeld reduce in value rapidly).

Tax

Often there are issues related to paying

tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

. Some complementary currencies are considered tax-exempt, but most of them are fully taxed as if they were national currency, with the caveat that the tax must be paid in the national currency. The legality and tax-status of complementary currencies varies widely from country to country; some systems in use in some countries would be illegal in others.

Types

Complementary currencies describe a wide group of exchange systems, currencies or

scrip A scrip (or '' chit'' in India) is any substitute for legal tender. It is often a form of credit. Scrips have been created and used for a variety of reasons, including exploitive payment of employees under truck systems; or for use in local com ...

s designed to be used in combination with standard currencies or other complementary currencies. They can be valued and exchanged in relationship to national currencies but also function as media of exchange on their own. Complementary currencies lie outside the nationally defined legal realm of

and are not used as such. Rate of exchange, scope of circulation and use in combination with other currencies differs greatly between complementary currency systems, as is the case with national currency systems. Freigeld1

Some complementary currencies incorporate value scales based on time or the backing of real resources (gold, oil, services, etc.). A

is valued by the time required to perform a service in hours, notwithstanding the potential market value of the service. Another type of complementary monetary systems is the barter, an exchange of specific goods or services is performed without the use of any currency. In 1982, the most widespread auxiliary currency system, the Local Exchange Trading Systems, was created. It regulates the exchange of goods and services between the members of the cooperative. Examples for an investment system of complementary currency are the Automatic Social Financial Network (ASFN) and the international crowdsourcing and crowd-funding community Evolution RA whose members use their own complementary virtual currency "Сyber-gold". The introductory fee paid by the new association members is subsequently directed toward investments in a variety of commercial projects. Some complementary currencies take advantage of

demurrage The term "demurrage" from Old French ''demeurage'', from ''demeurer'' – to linger, tarry – originated in vessel chartering and referred to the period when the charterer remained in possession of the vessel after the period normally allowed ...

fees, an intentional devaluation of the currency over time, like negative

interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...

. This stimulates market exchanges in the devaluating currency, propagates new participation in the currency system and forces the storage of wealth (hoarding) ability usually reserved for currency into more permanent and better value-holding tools like property, improvement, education, technology, health, equity securities, etc., all of which are sheltered from the currency-based demurrage fees. Other experimental complementary currencies use high interest fees to promote heavy competition between participants, and the removal of wealth from long term wealth holding structures (natural/material wealth, property, etc.) to aid in the process of rapid industrialization, mass production, automation and competitive innovation. Monetary speculation and gambling are usually outside the design parameters of complementary currencies. Complementary currencies are often intentionally restricted in their regional spread, time of validity or sector of use and may require a membership of participating individuals or points of acceptance. There are some complementary currencies that are regional or global, such as the

Community Exchange System The Community Exchange System (CES) is an internet-based global trading network which allows participants to buy and sell goods and services without using a national currency. It may be described as a type of local exchange trading system (LETS) ...

WIR Wir, WIR or WiR may also refer to: Organisations * WIR Bank, a complementary currency system in Switzerland * Washington and Idaho Railway * West India Regiments, a colonial regiment of the British Army * Wolność i Równość, a Polish politi ...

and Friendly Favors, Tibex in the

Lazio Lazio or Latium ( or ; ; la, Latium, ) is one of the 20 Regions of Italy, administrative regions of Italy. Situated in the Central Italy, central peninsular section of the country, it has 5,714,882 inhabitants – making it the second most popula ...

region in Italy or the proposed global currency

terra Terra may often refer to: * Terra (mythology), primeval Roman goddess * An alternate name for planet Earth, as well as the Latin name for the planet Terra may also refer to: Geography Astronomy * Terra (satellite), a multi-national NASA scienti ...

. A community currency is a type of complementary currency that has the explicit aim to support and build more equal, connected and sustainable societies. A community currency is designed to be used by a specific group. Since the advent of Bitcoin on January 3, 2009,

Cryptocurrency A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It i ...

has increased substantially as an alternative currency. Cryptocurrency allows for a trustless means of exchange through the use of decentralized mining, in which computers solve mathematical puzzles first in order to verify the transaction. This solves the problem of the sender and the receiver requiring a third party such as a bank in order to successfully complete the transaction. It also poses a challenge for governments when it comes to the confiscation of cryptocurrency since the private keys are retained by the owner of the cryptocurrency. Unless those keys are divulged, the owner retains complete control of their crypto. Other successful cryptocurrencies frequently used as alternative currencies include

Monero Monero (; Abbreviation: XMR) is a decentralized cryptocurrency. It uses a public distributed ledger with privacy-enhancing technologies that obfuscate transactions to achieve anonymity and fungibility. Observers cannot decipher addresses tradi ...

, Bitcoin Cash, Zcash, Dash, and many others.

Activists

Some complementary currency activists are Belgian ex-banker

Bernard Lietaer Bernard Lietaer (7 February 1942 – 4 February 2019) was a Belgian civil engineer, economist, author, and educator. He studied monetary systems and promoted the idea that communities can benefit from creating their own local or complementary c ...

, British economist Hazel Henderson, Dutch STRO-director Henk van Arkel that developed Cyclos, Qoin initiators Edgar Kampers and Rob van Hilten, Paul Glover of Ithaca HOURS,

Margrit Kennedy Margrit Kennedy (November 21, 1939, Chemnitz – December 28, 2013, Steyerberg) was a German architect, professor, environmentalist, author and advocate of complementary currencies and an interest- and inflation-free economy. In 2011, she initiat ...

from Monneta, LETSystem inventor Michael Linton, Time Banking inventor Edgar S. Cahn, Japanese Volunteer Labour Network founder Teruko Mizushima, Complementary Currency Resource Center coordinator Stephen DeMeulenaere and many others. Lietaer has argued that the world's national currencies are inadequate for the world's business needs, citing how 87 countries have experienced major currency crashes over a 20-year period, and arguing for complementary currencies as a way to protect against these problems. Lietaer has also spoken at an International Reciprocal Trade Association (IRTA) conference about

barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distingu ...

List of complementary currencies

Other non-regional complementary currencies include: * American Open Currency Standard (AOCS) * Commercial credit circuit *

(CES) – global exchange network *

Digital gold currency Digital gold currency (or DGC) is a form of electronic money (or digital currency) based on mass units of gold. It is a kind of representative money, like a US paper gold certificate at the time (from 1873 to 1933) that these were exchangeable ...

* Fourth Corner Exchange * Local Exchange Trading Systems (LETS) – an example of

mutual credit "Mutual credit" (sometimes called " multilateral barter" or "credit clearing") is a term mostly used in the field of complementary currencies to describe a common, usually small-scale, endogenous money system. The term implies that creditors an ...

, is a type of local currency used in a number of small communities worldwide. * Rábaközi Tallér * Sardex, alternative currency used in

Sardinia Sardinia ( ; it, Sardegna, label=Italian language, Italian, Corsican language, Corsican and Tabarchino ; sc, Sardigna , sdc, Sardhigna; french: Sardaigne; sdn, Saldigna; ca, Sardenya, label=Algherese dialect, Algherese and Catalan languag ...

The Sardex Factor, Financial Times
/ref> *

Ven Ven may refer to: Places * Ven, Heeze-Leende, a hamlet in the Netherlands * Ven (Sweden), an island * Ven, Tajikistan, a town * VEN or Venezuela Other uses * von Economo neurons, also called ''spindle neurons'' * '' Vên'', an EP by Eluveitie ...

– a digital currency used in

Hub Culture Hub Culture is an invitation-led social network service that operates its own digital currency Ven. Hub Culture is located in Bermuda,. Founded in 2002, it claims it had 32,000 members by 2021 - based on registered accounts. History In November ...

, a private social network *

WIR Bank The WIR Bank, formerly the Swiss Economic Circle ( German: ''Wirtschaftsring-Genossenschaft''), or WIR, is an independent complementary currency system in Switzerland that serves businesses in hospitality, construction, manufacturing, retail ...

– founded in 1934, oriented towards small and mid-sized corporations

References

External links

*
Community Currency Magazine
' *
International Journal of Community Currency Research
'

Social Trade Organisation

Secure eXchange Protocols

Trade Point: Internal currency of Barter platform
* {{DEFAULTSORT:Complementary Currency Local currencies Monetary reform Cryptocurrencies it:Valuta complementare