The Future of Money: Alternative Currencies Explained

The concept of alternative currencies has been around for centuries, with examples like the Wörgl Currency in Austria during the Great Depression, which was used to stimulate local economic activity by issuing paper notes that could be exchanged for goods and services.

This innovative approach to money was made possible by a group of local residents who were determined to help their community. They created a currency that was backed by labor, rather than gold or silver.

One of the most well-known alternative currencies today is Bitcoin, which was first introduced in 2009 and has since become a widely accepted form of digital currency. Bitcoin operates on a decentralized network, meaning that it's not controlled by any government or financial institution.

As we'll explore further in this article, alternative currencies like Bitcoin are changing the way we think about money and its role in our lives.

Alternative currencies are being created and used in various ways to benefit local communities. They can be used to keep wealth circulating locally, allowing local businesses and community members to continue exchanging essential goods and services.

In the US, for example, communities are creating their own forms of exchange that promote community cohesion by re-grounding economic relationships in real human connections. These alternative currencies are designed to solve specific social, environmental, and economic problems.

Some alternative currencies are even being used to empower economically-marginalized populations with an inclusive and accessible form of exchange. For instance, Hullcoin enables people in Hull to earn digital coins by volunteering and undertaking activities that benefit themselves.

There are different types of alternative currencies, including complementary currencies that are used locally to benefit the local economy and local businesses. BerkShares, for example, is a complementary currency that can be used in the Berkshires region of Massachusetts, and is available at some local banks at an exchange rate of $1 USD to 1 BerkShare.

Here are some key characteristics of alternative currencies:

Creating a resilient monetary system is crucial for a healthy economy. 97% of our money supply is put into circulation as debt by private for-profit banks, who control where that money first enters our economy.

This model is fundamentally flawed, as it prioritizes housing and financial services over the productive economy that provides essential livelihoods, goods, and services to communities. The US has one of the highest wealth inequality rates in the modern world: 93% of monetary wealth is owned by just 20% of the US population.

Communities across the world are creating their own forms of exchange to keep wealth circulating locally. These community currencies allow local businesses and community members to continue exchanging essential goods and services.

By re-grounding economic relationships in real human connections, community currencies promote community cohesion. They are designed to solve specific social, environmental, and economic problems.

Here are some examples of community currencies in action:

By creating their own currencies, communities can make their local economies more resilient to economic volatility and empower economically-marginalized populations with an inclusive and accessible form of exchange.

Alternative currencies are used to make cross-border payments or payouts in the foreign currencies of other countries that aren’t the functional currency of the payer.

They can also be types of cryptocurrency, such as digital currency Bitcoin or Ethereum, used as a store of value and means of exchange, mined with decentralized blockchain technology.

BerkShares, a complementary currency to the dollar, was launched in the Berkshires region of Massachusetts in 2006 to benefit the local economy and local businesses.

BerkShares paper currency is available at some local banks at an exchange rate of $1 U.S. dollar to 1 BerkShare, with a 1.5% fee for conversion.

This type of alternative currency is intended for spending in local communities and doesn't work for payments in other areas, such as out-of-area domestic or international payments and payouts.

Alternative currencies are often used for non-financial reasons, such as buying exclusive goods or using smart contracting systems that help enforce and execute contracts. This can be especially useful for trade between parties with low mutual trust.

Some people use alternative currencies for exploration, to learn about a technology that might become important. Others use them for social reasons, like fostering a community or making a political statement.

Here are some of the non-financial reasons people use alternative currencies, broken down:

In times of crisis, alternative economies and community currencies can thrive, as seen in Greece where the economic crisis led to the emergence of barter systems and alternative currencies.

The Totnes pound in England is another example of a community currency that has helped keep a local community resilient in the face of austerity.

In fact, the economic crisis was fundamental to the evolution of alternative economics in Greece, where trust in banks was eroded or they withdrew liquidity.

The Athens Integral Cooperative in Greece is one such example of a community currency that is creating a buzz elsewhere.

Community currencies can be spent into circulation by any trusted producer or reseller who is ready, willing, and able to reciprocate by redeeming the equivalent amount as payment for real value.

Redistributing wealth or income isn't a new idea, but what if the system that created money did it in a way that was more fair or more responsive to everyone up front?

The Totnes pound is just one example of outside the box thinking that has kept this local community resilient in the face of austerity.

Túmin in Mexico, an alternative currency, is designed to help build a social fabric that favors barter and interest-free loans, especially in the face of electronic banking growth.

FairCoop, a self-organized and self-managed global cooperative, is another example of a community currency that is creating a buzz elsewhere.

Alternative currencies often appeal to people for reasons beyond financial gain. These non-financial reasons can be quite diverse.

Some people use alternative currencies to buy exclusive goods or services that can only be purchased with that specific currency. This can be a unique way to acquire items that aren't available through traditional means.

Smart contracting is another reason people are drawn to alternative currencies. This technology allows for the enforcement and execution of contracts, making it easier for parties with low mutual trust to trade with each other.

People may also use alternative currencies for exploratory purposes, wanting to learn about a technology that might become important in the future. This can be a way to stay ahead of the curve and be part of a growing community.

Social reasons, such as political or moral motivations, can also drive people to use alternative currencies. This can be a way to foster a sense of community and shared values.

Some individuals may use alternative currencies simply to demonstrate qualities like modernity or a willingness to take risks. This can be a way to showcase one's forward-thinking attitude.

Unfortunately, alternative currencies have also been linked to a range of dishonest behaviors, including tax evasion and scams.

You can pay in a choice of available payment methods in 196 countries and 120 local/alternative currencies. This includes US ACH, Global ACH, wire transfer, PayPal, prepaid debit card, and paper check.

Tipalti's finance automation offers advanced Multi-FX software and FX Hedging software, which eliminates the need for regional foreign banks by using a virtual account to make payments with cost-effective live foreign exchange rates or transaction FX Hedging to reduce transaction foreign exchange risk losses recognized in FX accounting from exchange rate volatility in 30 currencies.

With AP automation software, you can make large batch alternative currency payouts or supplier payments efficiently and reduce fraud risk, while also achieving global regulatory compliance. This includes avoiding payments to entities on OFAC sanctions lists and following local currency regulations in foreign countries.

Here are the six payment method choices available with Tipalti's AP automation and mass payments software:

Tipalti's PayPal fee calculator can help you determine applicable domestic or international PayPal fees by country, and their PayPal "mass transaction" (MT) license provides access to more favorable FX rates and payment speeds.

For Value, you want to ensure that your transactions are stable and reliable. An alternative currency can be tied to a trusted fiat currency so that the alternative currency can always be exchanged for a predictable quantity of the fiat currency.

You can also link an alternative currency to real goods, providing certainty in respect of those goods. For example, an alternative currency tied to a chocolate bar or a haircut will still have value even if the price of those goods changes over time.

Alternative currencies can even manage their supply electronically to prevent inflation. This means that the value of your transactions will remain stable, regardless of market fluctuations.

Here are some methods alternative currencies use to control their value:

You can pay in a choice of available payment methods in 196 countries and 120 local/alternative currencies.

AP automation software and mass payments software let businesses make large batch alternative currency payouts or supplier payments efficiently and reduce fraud risk.

To simplify tax compliance, use AP automation or mass payments software with automated global regulatory compliance, and tax preparation reporting.

Tipalti AP automation and mass payments software achieve global regulatory compliance, avoiding payments to entities on OFAC sanctions lists and other blacklists.

With AP automation and mass payments software from Tipalti, your business can use its self-service supplier/partner onboarding portal to obtain contact and required payment information for the payee’s choice of cost-effective payment method available in their country.

The six payment method choices include US ACH, Global ACH, Wire transfer, PayPal, Prepaid debit card, and Paper check.

The recipient’s country determines the available payment methods for that location.