As the official bank of the United States, the Federal Reserve System issues the currency most Americans are familiar with: the U.S. Dollar. The dollar is the United States’ counterpart to the European Euro, the Japanese Yen and the Swiss Franc. By law, the dollar is legal tender in the United States and the unit of account for payment of taxes and settlement of financial obligations.
But it’s not the only currency in the United States.
Since the founding of the republic, states and communities have also issued community currencies. They have been especially popular during financial crises like the Great Depression. Local or community currencies are alternative exchange systems that facilitate barter trade. By agreeing to accept the local currency in exchange for goods or services, local communities hope to protect themselves against inflation, encourage more business with local vendors and stimulate local economic growth.
The difference between a community currency and the U.S. dollar is legal status. Community currencies are not legal tender, so no court would enforce payment of debts in them. Taxes cannot be paid in them. Accepting them as payment for products is completely voluntary.
That’s actually the way the U.S. dollar started. The founders modeled it after the Spanish dollar, which was the most popular coin in the world at the time. While there were many currencies circulating in the economy, early Americans chose to use the Spanish dollar because of its uniformity and consistent silver content.
Many local communities today are seeking to enjoy the benefits of a local currency. Most local currencies have been based upon paper scrip, but more and more communities are investigating the benefits of a precious metals-based currency. The Crow Nation recently worked with OpenCurrency to launch their own community currency, a local monetary system based upon minted silver, gold & copper coins.