Designing the Currency There is not one “ideal” design for a complementary currency. Almost
every design characteristic has advantages under certain circumstances
that can become disadvantages in others. The best design for your
community depends on what the objectives you have set for the medium of
exchange, and the conditions under which it has to operate. Various
objectives can be relevant to implement a currency system, such as the
functions the currency is supposed to serve, the type of concern it
addresses, or the people it aims to involve in exchanges. What follows are
examples of some of the design features of a complementary currency
system.
Legal Tender
Legal tender is the currency that the government of a country accepts as
payment in taxes.1 For example: “This note is legal tender for all debts
public and private” is printed on every US$ bill. What this means is that if
you owe someone money in the US and she refuses your offer to pay with
US$ bills, you can walk away and simply have the courts declare your debt
void.
One particularly important type of debt that almost everybody incurs is
taxes, and therefore “legal tender” means in this context that the
government of the corresponding country accepts only this type of
currency in payment for taxes. Normally, only the conventional national
currencies are defined as legal tender.2 However, in Japan two cities have
decided to accept their respective local complementary currency in
payment for local taxes, and use the proceeds in partial payment for
municipal service providers as well. Typically, complementary currencies
are designed to be complements to legal tender, rather than replacing it.
1 There is an important theory of money proposed by the “Chartalists” school founded by
Georg Friedrich Knapp in the 1920s that defines as money anything that the government
declares as acceptable in payment for taxes. See Knapp, Georg Friedrich The State Theory of
Money (Clifton, NY: Augustus M. Kelley , 1924). This school has a substantial following to
this day. See for instance: Wray, Randall Understanding Modern Money (Cheltenham, UK
and Northhampton, MA, US: Edward Edgar, 1998).
2 There are nevertheless exceptions, but they tend to be temporary in today’s world: for
instance, in Russia the government has accepted commodities and goods from corporations in
payment of taxes after the collapse of the Rubble in 1998.
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