Private currency

A private currency is a currency issued by a private organization, be it a commercial business or a nonprofit enterprise. It is often contrasted with fiat currency issued by governments or central banks. In many countries, the issuance of private paper currencies is severely restricted by law.

Today, there are over four-thousand privately issued currencies in more than 35 countries. These include commercial trade exchanges that use barter credits as units of exchange, private gold and silver exchanges, local paper money, computerized systems of credits and debits, and digital currencies in circulation, such as digital gold currency.

In the United States, the Free Banking Era lasted between 1837 and 1866, when almost anyone could issue paper money. States, municipalities, private banks, railroad and construction companies, stores, restaurants, churches and individuals printed an estimated 8,000 different types of money by 1860. If an issuer went bankrupt, closed, left town, or otherwise went out of business the note would be worthless. Such organizations earned the nickname of "wildcat banks" for a reputation of unreliability; they were often situated in remote, unpopulated locales said to be inhabited more by wildcats than by people. The National Bank Act of 1863 ended the "wildcat bank" period.

Since 1991, residents of and around the city of Ithaca in Western New York State have been using a private currency in which participating workers either earn or purchase Ithaca Hours, which may be used to buy goods and services locally. The system has been ruled legal provided all Hours-derived revenues are reported to the IRS as income.

BerkShares is a local currency that circulates in The Berkshires region of Massachusetts. It was launched on September 29, 2006 by BerkShares Inc., with research and development assistance from the E. F. Schumacher Society. The BerkShares website lists over 370 businesses in Berkshire County that accept the currency. In 30 months, 2.2 million BerkShares have been issued from 12 branch offices of five local banks.

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