A Complementary Currency: What Is It?
Any money or means of exchange that is not the official currency of a country but is permitted to be used there under certain circumstances is considered a supplementary currency.
A supplementary currency is established by private individuals, advocacy organizations, or government regulatory agencies to provide alternative marketplaces for certain commodities and services or within a particular geographic area; it is not meant to be utilized as the main medium of exchange in an economy.
A supplemental currency is intended to accomplish certain social, environmental, or political objectives or to control the local or regional economy.
KEY POINTS
- Complementary currencies are intended to be used in conjunction with fiat currency to advance a specific social objective.
- A complementary currency is a common example of a regional currency that is designed to encourage local expenditure.
- Cryptocurrencies are alternative currencies; however, they may also be regarded as complementary currencies if their creation and/or utilization serve a social or economic purpose.
Complementary Currency Examples
BerkShares is among the most well-known instances of a supplementary currency.
Only the Berkshire area of Massachusetts is able to accept BerkShares as local money.
Over 300 establishments now use BerkShares as payment, having started as an experiment by a nonprofit group to promote local investment and spending.
A subclass of supplementary currencies, BerkShares are frequently referred to as communal currencies.
Complementary currencies designed specifically to assist the objectives of a local or regional economy are known as community currencies.
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Carbon-based Credits
Cap-and-trade schemes for carbon regulation, while not branded or intended for use as a currency, have characteristics with complementary currencies in that value may be exchanged.
For instance, businesses may legally emit carbon by purchasing carbon credits from the European government.
There is now a market for exchanging extra credits across sectors.
The price of this currency is determined by regulators in a way that incentivizes businesses to cut their carbon emissions in accordance with government goals.
Kippu Fureai
Other complementary currencies include those based on talents or time, which function as a kind of barter system or focus community efforts in high-need regions.
A kind of supplementary money called the Fureai Kippu system originated in Japan.
The literal translation of “Fureai Kippu” is “ticket for a caring relationship.”
For each hour they work to assist an older adult, participants get an electronic money.
After then, the participant’s credit is kept in an online clearinghouse and may be redeemed (or transferred to another individual in need) whenever they want medical attention.
1995 saw the first implementation of the Fureai Kippu system in response to Japan’s aging population. Currently, the system is used by hundreds of organizations that accept the credits, and it has expanded to other Asian nations with elderly populations.
“Japan’s Fureai Kippu Time-Banking in Elderly Care: Origins, Development, Challenges and Impact,” International Journal of Community Currency Research.
Is Bitcoin an Adjunct Medium of Exchange?
Although complementary and alternative currencies are sometimes used synonymously, they differ slightly in that complementary currencies are designed to further the social or economic objectives of a community, group, or organization, whereas alternative currencies are typically defined as forms of exchange other than fiat currencies.
Some claim that Bitcoin satisfies both criteria as a form of payment.
Bitcoin has been used as a payment mechanism in war-torn places where regular banking was inaccessible and to fund journalistic freedom.
In remittances, when individuals who work in one nation transfer money to relatives in another, it is also often used.
Businesses all throughout the globe accept Bitcoin, and there are even Bitcoin ATMs.
It meets both social and economic purposes and is accepted as a means of trade in almost all nations.
There are, nonetheless, arguments that Bitcoin does not fit the description of either kind of money.
To this side, the only common objective is to retain it as an investment or to function as a currency independent of central banks.
Therefore, Bitcoin may no longer meet the criteria for an alternative currency or even for a complementary currency, according to some.
It’s thought that although while it served a larger ideological purpose in the past, its practical applications have decreased as a result of its increased usage in promoting a variety of agendas.
Regardless of your opinion, it’s crucial to remember that conversations about the wider uses of cryptocurrencies have given central bank digital currencies (CBDCs) a chance to establish themselves as legitimate forms of complementary currencies down the line.
What Does a Complementary Currency Look Like?
It’s interesting to note that towns in Columbia experiencing a scarcity of legal money employ coca-base, an extract from coca leaves.
The money used in the Massachusetts Berkshire region, known as “Berkshares,” is a less severe version.
How Do Alternative Currencies Operate?
Any form of payment that isn’t issued by the government is considered an alternative currency.
Since value is determined by the person using the alternative currency, exchanging cigarettes for goods or services amongst prisoners in a correctional facility is the use of an alternative currency.
What Is the Dollar’s Substitute?
It is dependent upon the question’s context.
Nobody is sure which nation’s currency will eventually take the place of the dollar.
However, cryptocurrencies may be the solution to the issue of what constitutes a substitute currency for the dollar.
The Final Word
The term “complementary currencies” refers to money or exchange rates that are seen to be a good match for a nation’s official currency.
They don’t replace an official, government-backed currency; rather, they are often created with social or local economic incentives in mind.
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