DEFINITION of 'Private Currency'

Units of value issued by private companies or organizations. A private currency is typically issued by a private firm or group, to act as an alternative to a national or fiat currency which would be the standard unit of value in a country. Although issuing private currency is restricted by law in many countries, there are still estimated to be thousands of private currencies circulating across the world.

BREAKING DOWN 'Private Currency'

Private currencies are often issued and backed by physical commodities, such as gold or silver. By backing a private currency with a commodity, issuers are able to increase the security of the asset, while limiting the effects of inflation on the currency's value, since commodities tend to move closely in line with inflation. Private currencies have been used in the United States since the mid-1800s and still continue to be used today, in some localities. For example, the "Ithaca HOUR" is a printed currency which has been exchanged in Ithaca, NY since 1991.

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