A complementary currency is a currency or medium of exchange that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies.^{[1]: 3 [2]: 2} Complementary currencies are usually not legal tender and their use is based on agreement between the parties exchanging the currency. According to Jérôme Blanc of Laboratoire d'Économie de la Firme et des Institutions, complementary currencies aim to protect, stimulate or orientate the economy.^[3]: 7 They may also be used to advance particular social, environmental, or political goals.^[4]: 4

When speaking about complementary currencies, a number of overlapping and often interchangeable terms are in use: local or community currencies are complementary currencies used within a locality or other form of community (such as business-based or online communities); regional currencies are similar to local currencies, but are used within a larger geographical region; and sectoral currencies are complementary currencies used within a single economic sector, such as education or health care. Many private currencies are complementary currencies issued by private businesses or organizations. Other terms include alternative currency, auxiliary currency, and microcurrency. Mutual credit is a form of alternative currency, and thus any form of lending that does not go through the banking system can be considered a form of alternative currency. Barters are another type of alternative currency. These are actually exchange systems, which trade only items, without the use of any currency whatsoever. Finally, LETS is a special form of barter that trades points for items. One point stands for one worker-hour of work, and is thus a time-based currency.

Purposes

Current complementary currencies have often been designed intentionally to address specific issues, for example to increase financial stability.^[5] Most complementary currencies have multiple purposes and/or are intended to address multiple issues. They can be useful for communities that do not have access to financial capital, and for adjusting peoples' spending behavior.^[6] The 2006 Annual Report of the Worldwide Database of Complementary Currency Systems presented a survey of 150 complementary currency systems in which 94 respondents said that "all reasons" were selected, among cooperation, micro/small/medium enterprise development, activating the local market, reducing the need for national currency, and community development.^[7]

Aims may include:

• resocialisation and emancipation
• lifeboat currencies^[jargon]
• to increase financial stability^[5]
• to reduce carbon emissions, by encouraging localisation of trade and relationships
• to encouraging use of under-used resources^[2]: 2
• to recognise the informal economy
• promote local businesses
• maintaining purchasing power, value preservation

Advantages

Alternative currencies increase in activity if the local economy slows down, and decrease in activity if the local economy goes up.^{[8][dubious – discuss]} They are most successful if the currency circulates within the users, in cycles or loops, as shown in an analysis of the use of Sardex by 1,477 entities in Sardinia in 2013 and 2014.^[9]

Disadvantages

According to professor Nikolaus Läufer's theory, the use of local currencies such as Freigeld can only increase economic activity temporarily. Lengthy use of a local currency will ultimately result in a decline in economic activity and lead to a destabilization of the economy. This is due to the increased circulation velocity of the money as the amount in circulation decreases (as currencies as Freigeld reduce in value rapidly).^{[10][clarification needed]}

Tax

There are some complementary currencies that are regional or global, such as the Community Exchange System, WIR and Friendly Favors, Tibex in the Lazio region in Italy or the proposed global currency terra.^[11]

A community currency is a type of complementary currency that has the explicit aim to support and build more equal, connected and sustainable societies. A community currency is designed to be used by a specific group.^[12]

Activists

Some complementary currency activists are Belgian ex-banker Bernard Lietaer, British economist Hazel Henderson, Dutch STRO-director Henk van Arkel that developed Cyclos, Qoin initiators Edgar Kampers and Rob van Hilten, Paul Glover of Ithaca HOURS, Margrit Kennedy from Monneta, LETSystem inventor Michael Linton, Time Banking inventor Edgar S. Cahn, Japanese Volunteer Labour Network founder Teruko Mizushima, Complementary Currency Resource Center coordinator Stephen DeMeulenaere, Romanian economist and entrepreneur Octavian Badescu as Minutes Bank founder and many others. Lietaer has argued that the world's national currencies are inadequate for the world's business needs, citing how 87 countries have experienced major currency crashes over a 20-year period, and arguing for complementary currencies as a way to protect against these problems.^[13] Lietaer has also spoken at an International Reciprocal Trade Association (IRTA) conference about barter.^[14]

List of complementary currencies

Other non-regional complementary currencies include: