What is a 'Complementary Currency (CC)'

Complementary currency is any currency which is not a national currency but has acceptance for use in specific conditions in a nation. This alternant currency is not intended for use 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 purpose.

BREAKING DOWN 'Complementary Currency (CC)'

Complementary currencies find a use in many contexts around the world, but the most famous recent example is bitcoin. The digital currency bitcoin launched in 2009 by a mysterious cryptographer known as Satoshi Nakamoto. The creation of bitcoin was, in part, to advance a libertarian agenda. Though bitcoin exchanges for national currencies, its value is not directly affected by government policy decisions. Its features enable the bitcoin to function in markets outside the control of government authorities.

Bitcoin has famously facilitated online marketplaces like 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 they fear will dilute the value of national currencies slowly over time through inflation.

Three Examples of Complementary Currency

  1. Digital currencies like bitcoin are only one example of complementary currencies. Other examples include European Union’s cap and trade system for regulating carbon. The European government issues carbon credits which companies purchase for the ability to emit carbon legally. A market has grown for the selling of excess credits between industries. These carbon credits, thus, become a complementary currency. Regulators work to set the price of this currency such that it encourages companies to reduce their carbon emissions in line with government targets.
  2. Complementary currencies may also be regional, like the alternative currency BerkShares from the Berkshires region of Massachusetts. Set up as an experiment by a nonprofit organization to encourage local spending and investment, more than 400 business now accepts them.
  3. At times of times of economic crisis or central-bank mismanagement of the national currency, some complementary currencies may find more favor by the population. For example, Many citizens of Argentina have relied on the Crédito. The Crédito is a complementary currency started by Argentine citizens seeking to shield themselves from the effects of runaway inflation of the Argentine Peso. The peso collapsed in value following a series of economic crises in the 1990s.
RELATED TERMS
  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Private Currency

    A private currency is typically issued by a private firm or group ...
  3. National Currency

    A national currency is a legal tender issued by a central bank ...
  4. International Currency Exchange ...

    An international currency exchange rate is the rate at which ...
  5. Currency Appreciation

    Currency appreciation is an increase in the value of one currency ...
  6. Currency Basket

    A currency basket is a group of currencies used to measure the ...
Related Articles
  1. Trading

    6 top-traded currencies and why they're so popular

    Every currency has specific features that affect its underlying value and price movements in the forex market.
  2. Insights

    The Currency Board: Understanding The Government's Bank

    Currency board or central bank - what's the difference? Find out more about this little-known monetary authority.
  3. Tech

    How To Trade Forex With Bitcoin (XOM, EXPE)

    We look at ways to trade forex with bitcoin and the pitfalls in doing so.
  4. Tech

    New Bitcoin Price Record: Over $2,000 Per Coin

    The price of Bitcoin has climbed to its highest point of all time, now trading at over $2000 per coin.
  5. Trading

    Top 5 Hardest-Hit Currencies

    The value of a country's currency is dependent on many factors that will cause it to fluctuate, relative to other world currencies.
  6. Tech

    Bitcoin's Main Stumbling Block: Navigating The Law

    Coders created Bitcoin to be decentralized and independent of governments and banks. Authorities are still struggling to create a legal framework.
  7. Investing

    What's Behind the Single-Family Office Interest in Bitcoin?

    Wealthy individuals and family investing offices are making purchases of Bitcoin at increasing rates. How come?
  8. Tech

    The Real Reason For the Rise In Bitcoin Prices (JPM, GS)

    Bitcoin is back in the news because its price has increased. What caused the price increase?
RELATED FAQS
  1. Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

    All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>
  2. When and why did the euro make its debut as a currency?

    On January 1, 1999, the European Union introduced its new currency, the euro. Learn more about its history. Read Answer >>
  3. How are international exchange rates set?

    Knowing the value of your home currency in relation to different foreign currencies helps investors to analyze investments ... Read Answer >>
  4. Is Bitcoin legal in the US?

    Learn about the legality of Bitcoin as a form of payment in the United States, as well as how it is produced and concerns ... Read Answer >>
Hot Definitions
  1. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  2. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  3. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  4. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  5. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  6. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
Trading Center