For most of us, ‘currency’ automatically means ‘legal tender’ currency, for example the Dollar or Pound, which we use every day. Running in parallel with this ‘normal’ money there are also many forms of so-called complementary currencies, which complement the national currency without trying to replace it: Regional currencies, Customer Loyalty Programs, Business to Business (B2B) barter systems and the WIR Bank, State-issued parallel currencies, LETS and Time Banks, so-called Virtual and Crypto-currencies (Bitcoin), Energy currencies, Freebanking and other Complementary Currencies. Each type of system fills a different niche in our economic ‘ecosystem’. A variety of monetary systems is just as useful for developing society as a variety of species is for a sustainable environment.

National currency is called ‘legal tender’ because it is the only type of money governments will accept for the payment of taxes and which can be used to legally settle all personal or business debts. The fact that national currency is now seemingly so universal and exclusive is actually a historical exception.

Modern national currencies regulated by central banks first emerged in the middle of the 19th century with early waves of globalization. In the Great Depression of the 1930s, other non-national currencies were issued by local governments and business networks to ameliorate the needs caused by the scarcity of the official legal tender money.

Currency expert Bernard Lietaer coined the term ‘complementary currency’ to show these currencies work alongside national currencies and do not try to replace them. National and complementary currencies have qualities and aims that the other does not have.

Complementary currencies differ from national currencies in respect of the three classic functions of money: unit of account, exchange medium and savings medium. Most complementary currencies optimize the exchange medium function and minimize the savings function. Some use very different units of account such as hours or kilowatt-hours while others are more interested in long-term stability.

The following classification makes it easier to grasp the variety of these currencies without turning it into a rigid or exclusive set of categories:

1. Regional money (follow this link for more on this topic)

Currencies typically bound to one geographical region and issued to promote the local economy.

2. Loyalty systems and commercial currencies (follow this link for more on this topic)

Customer ‘loyalty’ systems reward customers with points that are only issued by and may only be redeemed at participating companies. Strictly speaking, one should only speak of these points systems as ‘currencies’ when the points are transferable and accepted by more than one company as a payment medium.

3. Business Barter Systems and WIR Bank (follow this link for more on this topic)

The strict definition of barter describes direct swapping of goods or services that both parties want. If there is no direct ‘coincidence of wants’, no trade takes place. In the context of business ‘barter’ systems the word has a different meaning. Here, barter means trading without national currency. Businesses ‘clear’ exchanges between themselves by using ‘trade credits’. Negative and positive trades balance each other out in the central accounts – often called ‘mutual credit’ because the participants effectively offer each other credit.

The 80 year old WIR Bank, which has over 40,000 business members across Switzerland, operates a different system. Here, the bank issues loans against guarantees, just like a normal bank. The currency units created – WIR Francs – then circulate as currency until redeemed to pay off the original loan that created them.

4. Parallel currencies (follow this link for more on this topic)

Parallel currencies are ‘complementary’ currencies valid in the same ‘currency area’ as a national currency and are at least accepted by public bodies if not actually issued by them. This includes cases where a foreign currency is widely accepted, such as for example the US Dollar in Ecuador, or where a second state-issued currency is introduced, such as has been widely discussed as a possible alternative to ‘Grexit’ for Greece in recent times.

5. Exchange rings and time banks (follow this link for more on this topic)

Both exchange rings and time banks are usually very small and informally organized currencies focussed on social rather than commercial exchanges. These have different names in various countries: LETS (local exchange trading systems), exchange rings, social currencies, Tauschring or Tauschkreis (German speaking countries), SEL (France).

Time banks value labor at the rate of 1 hour = 1 hour, whereas other kinds of exchange ring allow people to charge ‘market rates’ using the local accounting units.

6. Virtual and crypto-currencies (follow this link for more on this topic)

These kinds of currencies are often noticed because they can be exchanged and traded for national currency. Virtual currencies are used in virtual worlds or online games, whilst so-called crypto-currencies aspire to be accepted everywhere as a payment medium. The most well-known and most often used currency of this type is Bitcoin. The term ‘crypto’ means ‘encrypted’ (transactions are encoded for security purposes) but this is only one aspect of the underlying technology, which is often called blockchain technology.

7. Energy currencies (follow this link for more on this topic)

The term ‘energy currencies’ includes a variety of currency proposals that are based on energy as a universal unit of value. Energy is often used as a measure of value or in some cases as backing or the basis of value of the currency. This approach is fascinating for many supporters of sustainable development but the number of actually circulating energy currencies is still very small.

8. Other complementary currencies (follow this link for more on this topic)

This overview of various complementary currencies does not claim to be complete. There are several competing typologies of complementary currencies and each has its strengths. We can observe an ever growing number of new concepts and projects, for example ‘reputation’ currencies, environmental currencies, educational currencies and investment vouchers.

9. Freebanking (follow this link for more on this topic)

The idea of letting private banks issue their own independent currencies has been practiced in some parts of the world (not only in the ‘economic mainstream’), especially in the 19th Century. This idea is normally only considered in connection with heterodox, liberal economic theory but in terms of currency diversity, the currencies issued by individual banks are naturally also a form of complementary currency.

For profiles of 16 of the world’s leading community currency systems, read the text of “People Money – the Promise of Regional Currencies”, Chapter 7, pages 93 to 194.