What is complementary currency? An ultimate guide

Understanding complementary currency

A complementary currency refers to a form of exchange that operates alongside, rather than replacing, a national currency within a country. It is established by private individuals, advocacy organizations, or governmental bodies to facilitate transactions for specific goods or services in localized or regional contexts. These currencies are designed to support local economies and address specific social, environmental, or political objectives.

Complementary currencies are designed with specific goals in mind and are not meant to supplant a nation's fiat currency. Depending on their type, they may have several drawbacks compared to national currencies, such as limited acceptance and potential volatility or inflation risks depending on how they are issued.

Rather than serving as a complete alternative currency, most complementary currencies are focused on achieving social or local economic objectives within narrow scopes.

Examples of alternative currencies

One notable example of a complementary currency is BerkShares, which functions as a local currency exclusively usable in Massachusetts' Berkshire region. Initiated by a nonprofit organization to promote local spending and investment, BerkShares are accepted at over 300 businesses. They are often categorized as a community currency, specifically designed to bolster local economies and their objectives.

Carbon credits

While not termed as currencies, carbon cap-and-trade systems resemble complementary currencies in their transferable value. For instance, the European Union issues carbon credits, which companies buy to emit carbon legally. A market has emerged for trading surplus credits between industries, with regulators setting prices to incentivize emissions reductions aligned with governmental targets.

Fureai Kippu

Complementary currencies can also take the form of time- or skill-based systems, effectively operating as barter or directing community efforts to critical needs. One example is Japan's Fureai Kippu, translating roughly as "ticket for a caring relationship." Participants earn electronic credits for each hour spent assisting elderly individuals, stored in an online clearinghouse for future use. Introduced in 1995 to address Japan's aging population, the system has expanded across Asia, involving numerous institutions and benefiting communities beyond Japan.

Is bitcoin considered a complementary currency?

Bitcoin is often discussed interchangeably as a complementary or alternative currency, though distinctions exist. Complementary currencies serve specific social or economic community goals, whereas alternative currencies encompass any non-fiat exchange medium. Bitcoin has been used globally for various purposes, from supporting journalistic freedom to facilitating remittances in areas lacking traditional banking. Despite its widespread acceptance and utility, some argue it no longer aligns with either currency type due to diverse use cases and investment purposes rather than a unifying social or economic agenda. This debate highlights evolving discussions around cryptocurrencies and their potential roles alongside central bank digital currencies (CBDCs) in future monetary landscapes.