Complementary currencies are exchange systems that operate alongside conventional national currencies, designed to serve specific social, economic, or environmental objectives within communities, regions, or sectors, creating pathways for value exchange where conventional money is insufficient or misaligned with community needs and values.
Unlike national currencies created and controlled by central banks, complementary currencies emerge from communities, organizations, or networks to address specific gaps in the conventional monetary system. These currencies are not typically considered legal tender but operate based on agreement between participants, creating parallel markets for certain goods and services or within defined geographic areas. By optimizing for specific functions like facilitating local exchange, building community resilience, or incentivizing sustainable behaviors, complementary currencies enable communities to direct economic activity toward collective priorities rather than being solely driven by conventional market dynamics.
Complementary currencies take diverse forms—from physical notes and time-banking systems to digital tokens and mutual credit networks—each designed to suit specific contexts and purposes. These systems generally emphasize the medium-of-exchange function of money over its store-of-value properties, encouraging circulation rather than accumulation. By creating economic feedback loops that align individual economic activity with community values, complementary currencies build resilience in local economies during economic downturns, increase social cohesion through reciprocal exchange, and empower communities to reclaim agency in shaping their economic futures.
Uses of “Complementary Currencies”
Local and Community Currencies
Local currencies operate within specific geographic areas to promote economic localization, strengthen community bonds, and build regional resilience. These systems typically issue physical or digital tokens exchangeable for local goods and services, creating incentives that keep economic activity circulating within their defined territory.
These currencies emerge in various contexts—from transition towns seeking sustainable futures to economically marginalized communities building self-sufficiency. While implementation details vary, local currencies generally establish local exchange networks that encourage buying from community businesses, increase the local economic multiplier effect, and build relationships between producers and consumers. Examples include the Bristol Pound (UK), BerkShares (Massachusetts, USA), and Chiemgauer (Germany), each demonstrating how community-based monetary innovation can redirect economic flows toward local priorities while building social capital and shared identity.
Mutual Credit Systems
Mutual credit systems create currency through the act of exchange itself, recording transactions as credits and debits in a shared ledger without requiring conventional money for initiation. These systems operate as member-owned exchange networks where currency is issued interest-free when trades occur, enabling participants to exchange goods and services even when conventional currency is scarce.
Local Exchange Trading Systems (LETS) exemplify this approach, allowing members to earn credits by providing services to others and spend them to receive services in return. Credit clearing exchanges for businesses operate on similar principles but at commercial scale, enabling trade during liquidity shortages. Time banks apply mutual credit specifically to service exchange, where one hour of any service equals one time credit, regardless of market valuation. These systems demonstrate how communities can create exchange mechanisms that valorize skills and resources undervalued by conventional markets while building reciprocal relationships beyond purely commercial transactions.
Complementary Currencies in Web3
Blockchain technology has revitalized complementary currency innovation by addressing persistent challenges around trust, scalability, and interoperability. Web3 frameworks enable the creation of digital complementary currencies with transparent governance, automated rule enforcement, and global accessibility, while maintaining community-defined purposes and values.
Smart contracts can encode the specific rules and incentives that define a complementary currency—from issuance parameters to demurrage mechanisms—ensuring that the currency operates according to its design principles without requiring centralized administration. Tokenization allows for transparent tracking of exchange and ownership, while decentralized governance enables democratic control over currency parameters. Communities can now design complementary currencies that function at both local and global scales simultaneously, creating nested systems where currencies with different optimization functions can interoperate through blockchain bridges and liquidity pools, allowing value to flow between specialized currency systems without losing their distinct characteristics.
Related Concepts
- Mutual Aid: Complementary currencies often formalize mutual aid networks through trackable exchange systems
- Solidarity: Complementary currencies embody economic solidarity by creating exchange systems aligned with community values
- Cooperative: Cooperative principles frequently inform the governance of complementary currency systems
- ReFi: Regenerative Finance incorporates complementary currencies to incentivize ecological restoration
- Decentralization: Complementary currencies distribute monetary creation and governance away from centralized institutions
- Coordination: Complementary currencies provide coordination mechanisms for aligning economic activity with collective priorities
References and Resources
- Lietaer, Bernard & Dunne, Jacqui (2013). “Rethinking Money: How New Currencies Turn Scarcity into Prosperity” - Comprehensive exploration of complementary currency systems
- North, Peter (2014). “Money and Liberation: The Micropolitics of Alternative Currency Movements” - Analysis of the political dimensions of complementary currencies
- Greco, Thomas H. (2001). “Money: Understanding and Creating Alternatives to Legal Tender” - Practical guide to complementary currency design
- International Journal of Community Currency Research - Academic resource on complementary currency systems globally