WHAT IS 'Complementary Currency - CC'

A complementary currency is any currency which is not a national currency, and is not intended to be used as the primary means of exchange in an economy. Complementary currencies are set up by private citizens, advocacy groups, or public regulatory bodies to create parallel markets for specific goods and services, or within a specific geographic region, with the goal of regulating the economy or achieving a particular social, environmental, or political goal.

BREAKING DOWN 'Complementary Currency - CC'

Complementary currencies are used in many contexts around the world, but the most famous recent example is bitcoin. A digital currency launched in 2009 by a mysterious cryptographer known as Satoshi Nakamoto, bitcoin was created in part to advance a libertarian agenda. Though bitcoin can be exchanged for national currencies, its value is not directly affected by government policy decisions, and it enables the functioning of markets outside the control of government authorities. Bitcoin has famously facilitated online marketplaces like the the now defunct Silk Road, where users could buy and sell illegal goods and substances. But it is also prized by some investors because it is free from the influence of central banks, which dilute the value of national currencies slowly over time through inflation.

Examples of Complementary Currency

Digital currencies like bitcoin are just one type of complementary currency. Other examples include European Union’s cap and trade system for regulating carbon, wherein the European government issues carbon “credits” which companies must purchase in order to legally emit carbon. These carbon credits become their own currency, and regulators work to set the price of this currency such that it encourages companies to reduce their carbon emissions in line with government targets.

Complementary currencies are also sometimes regional in nature, like the alternative currency BerkShares, which are accepted by more than 400 business in the Berkshires region of Massachusetts. The currency was set up as an experiment by a local nonprofit organization in an effort to encourage spending at local businesses and reinvestment in the local economy.

Sometimes complementary currencies are turned to by users of a national currency in times of economic crisis or central-bank mismanagement of the national currency. For example, Many citizens of Argentina have relied on the Crédito, a complementary currency started by Argentine citizens seeking to shield themselves from the effects of runaway inflation of the Argentine Peso, which collapsed in value following a series of economic crises in the 1990s.

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