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.
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