Local Currencies

Legal Basics for Complementary Currencies

Part 1 of Legal Basics for Complementary Currencies (above video) covers essential legal issues, including:

  • Laws prohibiting complementary currencies
  • Laws limiting the form of currencies
  • Currencies and the US Constitution
  • Paying employees with complementary currencies
  • Tax

Fostering a More Resilient Economy with Complementary Currencies

At the heart of our work at SELC is the concept of resilience – the capacity for a system (such as a community, an ecosystem, a business, or the global economy) to absorb shocks and retain its basic functioning and structure. Resilience is ultimately rooted in diversity. The more diverse a system is, the more flexible, inclusive and ultimately resilient it becomes.

One of the most important parts of our economy – and indeed our lives – is money. Yet our national and international money systems are one of the least resilient aspects of the global economy, given their reliance on an extremely small number of highly interconnected national currencies. In such a brittle system, there will always be people without money because scarcity is built into its very creation. But what if there were other ways of exchanging and valuing wealth, ways that did not perpetuate debt and income inequality?

We believe that a resilient and just economy includes many diverse forms of exchange, allowing all members of a community to meaningfully participate in the economy and have their gifts valued appropriately. Community currencies are one way of strengthening both local economies and our national economy as a whole, by giving more people access to a means of exchange and thus increasing economic activity in ways that support, rather than destroy, local communities and the natural world.

Repeatedly and across cultures, community currencies have emerged in times of financial instability, both as practical responses to failing national currencies and as ways of strengthening community cohesion in times of political uncertainty. Particularly in times of volatility, enhancing community resilience (social, economic, and spiritual resilience) will depend on both insulating local economies from the volatility of global markets and reaffirming community cohesion by fostering more connections within and between communities.

There are many innovative examples of community currencies thriving in places across the US and abroad: from BerkShares in Massachusetts to Ithaca HOURS in New York, from the Bristol and Brixton Pounds in England to social currencies like Banco Palma in Brazil, and as close to home as Davis Dollars and Bay Bucks right here in California.

Fostering the growth of more diverse forms of exchange – including community currencies – will help to keep more wealth circulating in our communities, allow more people access to means of creating jobs and economic activity, and preserve the unique local identity of communities across the state. California has always been at the leading edge of social and economic innovation. SELC’s new bill will allow us to stay at that dynamic edge.

Frequently Asked Questions About Community Currencies

Q: How would a community currency strengthen our local economy?

A: Money can be understood in terms of its flow or its circulation within an economy. Every time a dollar is spent in your community, it allows for someone else to spend that dollar again somewhere else. In a resilient local economy, that dollar could be spent many times locally, maintaining and growing the wealth of that community. However, most of our dollars these days flow out of our communities as soon as they are used, enriching national and multinational companies far away from where the money is spent. A community currency is inherently limited to a particular place or group, so it incentives people to shop at locally-owned businesses and keeps wealth flowing within the community. This is called the multiplier effect.

Q: Do I still have to pay taxes on purchases made with a community currency?

A: Complementary currencies are subject to sales and income tax in the same way that dollars are, and those taxes are always paid in dollars. Particularly with the development of electronic currencies, online accounting systems make it easy to keep track of one’s expense, manage an account, and prevent tax evasion.

Q: How are community currencies different from Bitcoin and other virtual currencies?

A: While Bitcoin is a potentially disruptive technology, it is primarily designed to be global and anonymous, while community currencies are designed to be rooted in a specific place and increase personal relationships. Likewise, Bitcoin’s value is based in scarcity, and is subject to wild speculation and concentration in the hands of a few wealthy investors. Community currencies are designed to increase the circulation of goods and services and primarily function as a means of exchange, rather than an investment or store of value.

Regulations on the Creation and Administration of Currencies

As a general rule, in most states it is legal for private individuals and groups to issue money.1 Issuing money can be as easy as falling off a log, or, to be more precise, as easy as issuing a gift certificate.  A gift certificate is essentially a note that allows the holder to redeem it for goods or services of a certain value or quantity.  If someone issues many such notes, and if the notes begin to flow [like a current] from person to person as a medium of exchange, then they have become current, or, in other words, a currency.  Rather than stop people from issuing their own currencies, the government has, for the most part, decided to go with the “flow.”

At the same time, there are a handful of laws that restrict who may issue currency, how, and what it may look like.  Many of these laws were put in place by Founding Fathers that had no idea what money would look like and how it would move around in the 21st Century.  This makes the laws somewhat mysterious or awkward in their application today.  Courts have sometimes acknowledged that it may be unjust to enforce some of the early laws related to money and coinage, since the creators of those laws did not foresee the way that money would be created, used, and circulated today.  In a case that involved charges of counterfeiting by defendants that made metal coins sometimes used in vending machines, the court noted that “[t]he difficulty is that this indictment seeks to charge the defendants with an offense under statutes which were enacted over one hundred years ago when vending machines probably did not exist.” 2

Note that there is a wonderful source of legal information about local currencies, found in Chapter 7 of Rethinking Our Centralized Money System, by Lewis D. Solomon.3

Complementary Currencies in the U.S.

This list is far from exhaustive, but provides a sampling of different complementary currencies across the US:

  1. Ithaca HOURS – Ithaca HOURS were created during the 1991 recession to sustain the economy in Ithaca, N.Y., and stem the loss of jobs. It is a legal and taxable local currency that uses a livable hourly wage as the standard.
  2. BerkShares
  3. Bay Bucks – paper scrip tied to the U.S. dollar and modeled partially on the successful model of Ithaca HOURS. They are a project of the Traverse Area Community Currency Corporation, a non profit created for the purpose of providing trustworthy tools for local exchange.
  4. Brooklyn Torch
  5. North Carolina PLENTY – Piedmont Local EcoNomy Tender (PLENTY) began circulating in the North Carolina Piedmont region (including Orange, Durham, and parts of Chatham and Alamance Counties) in October 2002.
  6. Cascadia Hour Exchange – Established in 1994.
  7. Madison Hours – Madison, Wisconsin
  8. Equal Dollars – Philadelphia, Pennsylvania
  9. RiverHOURS – Columbia Gorge region of Washington state. Established in 2004 by the Gorge Local Currency Cooperative.
  10. Corvallis Hour Exchange – Corvallis, Oregon
  11. Community Exchange System
  12. Life Dollars  – Pacific Northwest region of the U.S., centered around Bellingham, Port Townsend and Seattle, Washington. Created by the Fourth Corner Exchange Chapter of the Life Currency Cooperative Exchange.
  13. Baltimore BNotes
  14. Bay Bucks (SF)  – A business-to-business mutual credit system serving the San Francisco Bay Area bioregion established in 2013.
  15. Davis Dollars – A community currency in Davis, CA
  16. Fairbucks – Fairfax, CA
  17. Monetary Ecology project – Santa Barbara

Complementary Currencies Outside The U.S.

  1. WIR – Switzerland’s complimentary currency, the Wirtschaftsring (Cercle Économique) or “Economic Circle,” founded in 1934, is referred to nowadays as the WIR-bank. The WIR is actually a centralized credit system for multilateral exchange, with no physical currency. (See also effect of WIR-Bank on Swiss economic stability, James Stodder)
  2. Lewes Pound – launched in 2008 in the town of Lewes, England. It is a five year pilot project of Transition Lewes (part of the international Transition Town movement).
  3. Totnes Pound – Local currency of Totnes, UK, birthplace of the international Transition Town movement.
  4. Bristol Pound – One of the most successful local currencies in the UK. The Mayor of Bristol currently takes most of his salary in Bristol Pounds and has encouraged other local government employees to do so as well!
  5. Brixton Pound
  6. Calgary Dollars – Launched in 2002 in the town of Calgary, Canada. It is a scrip pegged to the Canadian federal currency.
  7. Toronto Dollars – Launched in 1998 and can be purchased for $1 Canadian, with 10% of the price directed to local charity.
  8. Salt Spring Dollars – launched in 2001 and are considered gift certificates equal in value to the Canadian dollar. 5% of purchase price is directed to local charities, and local businesses must pay a 5% deposit fee to encourage continual circulation of the currency.
  9. Fureai Kippu: Largest time bank in the world, in Japan. You can earn credits by helping elderly, etc.
  10. Banco Palmas: Very successful currencies issued and locally administered in Brazil, backed by local community agreeing to accept them, given to people as low or no interest loans.
  11. Bangla Pesa – An innovative local currency designed to stabilize and improve the local economy of informal settlements in Bangladesh, Kenya
  12. Lithuanian learning currency
  13. German currency


  1. “Private money is not prohibited if it complies with certain government regulations,” from Barbara A. Good, “Private Money: Everything Old is New Again,” Federal Reserve Bank of Cleveland, April 1, 1998
  2. United States v. Gellman, 44 F.Supp. 360, 365-66 (D.Minn.1942)
  3. Lewis D. Solomon, Rethinking Our Centralized Money System, Praeger Publishers (1996), pp. 104-105