Complementary Currency News, Understanding the Basics

Complementary currencies are local exchange systems that exist alongside traditional fiat currencies. They're not meant to replace them, but rather to fill gaps in the financial system, promoting economic activity and community development.

Complementary currencies are often created to address specific needs or goals, such as increasing local spending, supporting small businesses, or providing financial inclusion for marginalized groups. They can be issued by governments, organizations, or even individuals.

Some complementary currencies, like the Bristol Pound in the UK, are pegged to the value of the local currency, while others, like the Ithaca Hour in the US, are based on time banks, where one hour of work equals one hour of credit.

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A complementary currency is any currency or exchange medium that's not a national currency, but is accepted for use under specific conditions in a nation.

Complementary currencies are not intended to be used as the primary means of exchange in an economy, but rather to create parallel markets for specific goods and services or within a specific geographic region.

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They're set up by private citizens, advocacy groups, or public regulatory bodies to achieve a particular social, environmental, or political purpose.

A complementary currency is not a replacement for official currency, but rather a supplement to it.

In some cases, complementary currencies can be used in areas where there's a shortage of official currency, like in villages in Colombia where coca-base is used.

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Complementary currencies can take many forms, and here are a few examples. BerkShares, a local currency in Massachusetts, has over 300 businesses that accept it as a form of payment.

One of the most interesting aspects of complementary currencies is their ability to support local economies. The Fureai Kippu system in Japan, which rewards people for helping older adults, is a great example of this. Hundreds of institutions participate in the system, and it has spread to other countries in Asia.

In the UK, Transition towns have created local currencies with printed notes, inspired by BerkShares. These currencies, such as the Lewes Pound, are meant to be roughly equivalent to the national currency and can only be spent with participating businesses.

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The Fureai Kippu system is a type of complementary currency started in Japan in 1995 to address the country's aging population.

It's based on a barter system, where participants earn electronic credits for every hour of labor they spend helping an older adult, which can then be redeemed when they need care themselves.

Fureai Kippu credits are held in an online clearinghouse, making it easy to track and redeem them.

The system has spread to other countries in Asia with aging populations.

Hundreds of institutions in Japan now participate in the system and accept the credits.

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Local Exchange Trading Systems (LETS) are a type of local currency that has been around since the 1980s. They have no printed notes or coins, but give their currency unit a distinctive local name.

The value of a currency unit is often, but not necessarily, notionally the same as the national currency. A LETS is a community enterprise, like any other, and needs active volunteers to run it.

To see if you have a local LETS scheme, you can check at LETS-linkup. If you want to set up a LETS, there is a lot of support available, including online software from organisations like Community Forge.

Community Forge is a non-profit association that designs, develops and distributes free, open-source software for building communities with currencies. Free hosting is also offered, and it's currently used by about 40 communities.

The Community Exchange System (CES) is another example of a LETS or Time Bank style currency, and it's well established with several hundred communities using it. This system provides the means for its users to exchange their goods and services, both locally and remotely.

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Complementary currencies are not meant to replace a nation's fiat or national currency, but instead have social or local economic goals that are limited in scope. They may be limited in terms of usage and prone to volatility and inflation.

Reserve-backed complementary currencies operate with the national currency or certain goods functioning as a reserve to enhance confidence in the complementary currency. This can help to stabilize the value of the currency.

Sectoral currencies, on the other hand, are issue-specific currencies designed to address particular problems such as education, care work, or environmental protection. They can be very effective in covering a manageable sub-range, as seen in the example of the Torekes in Ghent, Belgium.

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The concept of alternative currencies is fascinating, and one of the most interesting aspects is the idea of complementary currencies. These are currencies that operate alongside a country's legal tender and are confined to specific regions, business networks, or sectors. They can take various forms, including cash, digital, or hybrid mediums, and can be backed by different reserves.

One example of a complementary currency is the Carib$, which is an asset-backed currency designed to maintain a stable value. It's meant to serve as a high-speed, low-cost cross-border payment medium, connecting the Caribbean Single Market and Economy (CSME) and facilitating seamless transactions within the region. This currency is a proposed solution to the Caribbean's cross-border settlement challenges, which are currently hindered by a reliance on foreign correspondent banks and limited USD liquidity.

Reserve-backed complementary currencies are another type, where the national currency or certain goods function as a reserve to enhance confidence in the currency. This concept is mentioned in the context of reserve-backed complementary currencies, which operate with the national currency or certain goods functioning as a reserve.

There are many forms of complementary currencies, and they can be designed with a social or local economic incentive in mind. For example, Berkshares, Inc. has a complementary currency called Berkshares, which is used in Massachusetts to promote local economic development.

Sectoral currencies are issue-specific, aiming to solve particular problems such as care for the elderly, environmental protection, or youth work.

They operate similarly to time banks, counteracting individuation and forging community and social networks.

Sectoral currencies differ from LETS and time banks in their design for specific problems.

The Torekes in Ghent, Belgium, is an example of a sectoral currency that rewards social and environmental work with a paper voucher.

This voucher can be spent in rent for a garden plot or organic food.

In Japan, the "Hurei Kippu" system earns hourly credits through work for the elderly, which can be redeemed for care work.

Mutual credit systems are a type of complementary currency that creates new money within a community without an external reference or reserve currency. They are used locally in noncommercial settings, between companies, or in different areas of social life.

These systems provide access to credit and liquidity for all participants who can and want to contribute to the community. Credit creation is carried out by the participants themselves, but the credit limit is set by the joint institution.

Mutual credit currencies are the "mother of complementary currencies" and are used in many communities worldwide. There are over a few thousand LETS (Local Exchange Trading Systems) worldwide, each with between 10 and a few hundred members.

Mutual credit systems are a type of local currency that allows communities to create their own credit and exchange goods and services without the need for an external reference or reserve currency.

Mutual credit currencies are created within a community and are used locally in noncommercial settings, between companies or in different areas of social life. They provide access to credit and liquidity for all those who can and want to contribute to the community.

The credit creation is carried out by the participants themselves, but the credit limit is set by the joint institution. The more participants take part, the higher is the potential limit.

Mutual credit currencies like LETS (Local Exchange Trading Systems) and Time Banks focus on the informal and noncommercial sector. They connect people beyond the logic of economic markets and match their respective capacities with their demand.

LETS generally define one working hour as the internal accounting unit. Most exchange is done using this unit to measure exchange value.

Time Banks also use hours as their currency unit, where participants deposit hours by giving practical help and support to others, and withdraw equivalent support in time when they themselves are in need.

There are no central money-issuing authorities in mutual credit systems, so the amount of money in circulation expands and contracts as it is needed, making it never in short supply.

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Energy-backed currencies have been proposed as a way to stabilize local economies.

Shann Turnbull's idea of a "renewable energy dollar" in 1977 is an early example of this concept.

The distribution of energy-backed currencies is limited because it's difficult to convince businesspeople to use them.

Digitalization may help overcome this hurdle by making it easier to implement and use these currencies.

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Complementary currencies come in various forms, including local exchange trading systems (LETS), time banks, and community currencies.

Some complementary currencies, like the Bristol Pound, are tied to a specific geographic area and can only be used within that region.

The Bristol Pound, for example, is accepted by over 1,000 businesses in the city of Bristol, making it a widely accepted form of currency.

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There are several types of currencies, each with its own unique characteristics.

Fiat currency is a type of currency that has no intrinsic value, but is instead backed by the government that issues it.

Commodity-backed currency is a type of currency that is backed by a physical commodity, such as gold or silver.

Digital currency is a type of currency that exists only in electronic form, and can be transferred online.

Cryptocurrency is a type of digital currency that uses cryptography for secure financial transactions.

The value of commodity-backed currency is tied to the value of the underlying commodity, which can be volatile.

Digital currency can be transferred quickly and easily, but it may not be widely accepted.

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Fiat complementary currencies are the most challenging type to imagine, as most national currencies can be understood as fiat currencies, gaining value because they can be used to pay taxes.

In the past, communities have successfully issued complementary local currencies that are accepted for tax payments, such as the American colonies' "colonial scrips" since the end of the 17th century.

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