Local Currency: A Comprehensive Overview

Terminology

Local currency refers to a currency that can be spent in a specific geographical locality at participating organizations. It acts as a complementary currency to a national currency rather than replacing it and aims to encourage spending within a local community, especially with locally owned businesses. Local currencies may not be backed by a national government nor be legal tender.

Key Facts

  1. Terminology:
    • Complementary currency: A currency used alongside the national currency as a medium of exchange .
    • Community currency: A complementary currency used by a group with a common bond, such as residents of a locality or members of an online community.
    • Regional currency: A local currency that encompasses a larger geographical area.
    • Auxiliary currency, microcurrency, Eco-Money: Less common synonyms for community or local currency.
    • Private currency: A currency issued by an individual, business, or non-governmental organization .
    • Sectoral currency: A complementary currency used within a specific economic sector.
    • Alternative currency: A currency designed to work in conjunction with the national currency, or a type of private currency that aims to supplant or circumvent the national currency.
  2. Purpose:
    • Local currencies aim to achieve social or environmental objectives by using money as a tool.
    • They can democratize services and organizations, support small and medium enterprises, counter inequality and social exclusion, address environmental impacts, and maintain purchasing power.
  3. Benefits:
    • Local currencies with negative interest rates or demurrage tend to circulate more rapidly, resulting in greater economic activity .
    • They enable communities to fully utilize their existing productive resources, especially unemployed labor, which can have a catalytic effect on the local economy .
    • Local currencies encourage the purchase of locally produced and locally-available goods and services, keeping more benefits within the local community .
    • Some forms of complementary currency can promote resource use over a wider geographic area and bridge distance barriers .
    • Electronic forms of complementary currency can be used to stimulate global transactions through the internet .

Purpose

Local currencies are designed to use money as a tool to achieve social or environmental objectives. They aim to:

  • Democratize services and organizations: Time credits for volunteering encourage people to actively engage in their community while making services more democratic.
  • Support small and medium enterprises: Community currencies can promote independent shops over large corporations by keeping money circulating locally. They can also help SMEs support each other financially by lending and receiving credit, goods, and services within the currency network.
  • Counter inequality and social exclusion: Specially designed currencies can address inequality issues by giving everyone the chance to get involved in their community, for instance, by rewarding participation in voluntary programs.
  • Address environmental impacts: Community currencies can play a role in better valuation of environmental resources and providing an incentive for more sustainable behavior.
  • Maintain purchasing power and value preservation: Convertible Minute / Minutes Bank is an example of a currency that focuses on maintaining purchasing power.

Benefits

Local currencies offer several benefits, including:

  • Increased circulation and economic activity: Local currencies with negative interest rates or demurrage tend to circulate more rapidly than national currencies, resulting in greater overall economic activity.
  • Utilization of local resources: They enable communities to fully utilize their existing productive resources, especially unemployed labor, which can have a catalytic effect on the local economy.
  • Support for local businesses: Local currencies encourage the purchase of locally produced and locally-available goods and services, keeping more benefits within the local community.
  • Bridging geographical barriers: Some forms of complementary currency can promote resource use over a wider geographic area and bridge distance barriers.
  • Global transactions: Electronic forms of complementary currency can be used to stimulate global transactions through the internet.

Conclusion

Local currencies are a diverse and evolving field of study and practice. They offer a range of potential benefits, including increased economic activity, support for local businesses, and the promotion of social and environmental objectives. As local currencies continue to develop, it will be important to monitor their impacts and learn from both successes and challenges in order to inform future policy and practice.

References

  1. Local currency – Wikipedia
  2. What Are Local Currencies? Examples of How to Redesign the Economy – Youmatter
  3. Local Currency – LEAN LOGIC

FAQs

What is local currency?

Local currency refers to a currency that can be spent in a specific geographical locality at participating organizations. It acts as a complementary currency to a national currency, encouraging spending within a local community, especially with locally owned businesses.

What are the different types of local currencies?

Local currencies can be classified into several types, including transition currency, rewards currency, and mutual credit currency. Transition currency is based on local currencies used by the Transition Towns movement, rewards currency is based on the frequent flyer model, and mutual credit currency is based on the mutual credit system.

What are the benefits of using local currency?

Local currencies offer several benefits, such as increased circulation and economic activity, utilization of local resources, support for local businesses, bridging geographical barriers, and the promotion of social and environmental objectives.

What are some examples of local currencies?

Examples of local currencies include the Salt Spring Dollar in Canada, the Bristol Pound in the UK, the WIR franc in Switzerland, and the Ithaca Hour in the United States.

How do local currencies work?

Local currencies typically operate as complementary currencies alongside national currencies. They can be used to purchase goods and services from participating businesses within a specific geographical area. Local currencies may be issued by local governments, community organizations, or private businesses.

What are the challenges associated with local currencies?

Local currencies can face challenges such as limited acceptance, difficulties in managing and regulating the currency, and potential for fraud or abuse.

What is the future of local currencies?

The future of local currencies is uncertain but holds potential for growth and innovation. As communities and governments explore new ways to promote local economic development and sustainability, local currencies may play an increasingly significant role.

How can I get involved in local currency initiatives?

If you are interested in getting involved in local currency initiatives, you can research local currency groups or organizations in your area. You can also look for businesses that accept local currencies and support them by making purchases using the local currency.

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