Local Currency

What is a local currency?

A local currency is a means of payment that is accepted only in a particular area or among the members of a network. It stands alongside legal money and does not replace it, which is why it is also called a complementary currency. It is almost always pegged one to one to the euro, the franc or the pound.

Money earned in an area often flows out of it quickly, to chains, mail-order firms and distant suppliers. A local currency steers part of it back into the local cycle. The baker pays the miller, the miller pays the workshop, the workshop pays the baker. The same spending power changes hands several times before it leaves the area.

Three terms, three models

The words local currency cover rather different things.

Local money with notes. Members exchange euros or pounds for notes of their own currency and pay with them in participating shops. Behind each note lies a unit of legal money as backing. Examples are the Chiemgauer, the Brixton Pound and the Bristol Pound.

Complementary currency is the umbrella term for any means of payment that exists alongside legal money, whether as notes, in electronic form or as time credits.

Mutual credit is the third model and the most important one for Sardinia. Here no euros are paid in. Members keep accounts that start at zero. When one business sells a service to another, its account goes up and the buyer's account goes down by the same amount. One member's credit is another member's debt, and the sum of all accounts stays at zero. Money is therefore created at the moment of trade, and it disappears again once the debt is balanced by a sale of one's own. The local exchange trading system, or LETS, described on the page about invisible structures, follows the same logic among private people; the large mutual credit circuits work among businesses.

All three differ clearly from cryptocurrencies. A bitcoin is created on a decentralised computer network, its price moves on the market, and it is tied to no region. A local currency usually has no exchange rate of its own, an organisation responsible for it keeps the accounts, and it needs no blockchain.

The model: WIR in Switzerland

Europe's oldest large mutual credit circuit was born in the Great Depression. In 1934 sixteen businesspeople around Werner Zimmermann and Paul Enz founded the Wirtschaftsring, the economic circle, known as WIR, in Zurich as a cooperative. In WIR the members granted each other interest-free credit in a unit of their own. The founders had been influenced by the ideas of the economist Silvio Gesell. According to a 2025 report by the Swiss broadcaster RSI, WIR today counts more than 50,000 member firms; since the late 1990s the WIR Bank has also offered services in Swiss francs.

Sardex: a mutual credit circuit from Sardinia

Some 75 years later five young Sardinians took up the idea. In 2009 Gabriele Littera, Giuseppe Littera, Carlo Mancosu, Piero Sanna and Franco Contu founded Sardex in Serramanna in the south of the island, in the middle of the credit crunch after the financial crisis, which hit small businesses on an already remote island particularly hard. Their declared model was WIR.

Sardex began as a circle among businesses. Each member receives a credit line in Sardex, with one Sardex worth one euro. With this credit it buys goods and services from other members, for example a hotel from a laundry service, the laundry from a print shop, the print shop from the hotel. A digital platform matches supply and demand and records every transaction. Each business is debtor and creditor at the same time.

How the interest-free credit works

The core is mutual credit. A business that joins does not have to pay anything in. It can buy up to the limit of its credit line and is then in the negative. This negative balance costs no interest. It is paid off through work and goods. The business sells to other members in turn and so brings its account back into balance.

For a small business this has two consequences. It can buy without tying up cash, and it gains customers it would not otherwise have reached, because they can spend their balance only within the circle. The balance thus acts as an incentive to buy within the region. The circle works only if giving and taking stay in balance over time, however. A member that only buys and offers nothing others need is a burden on everyone.

What research says about Sardex

Laura Sartori of the University of Bologna and Paolo Dini of the London School of Economics interviewed members and founders. Writing in the journal Stato e mercato in 2016, they concluded that trust was and remains fundamental to building and running the circuit. Sardex, they found, combines economic and social values and has become a mediating institution for trade on the island at the regional level.

Together with Giuseppe Littera and Panayotis Antoniadis, Sartori and Dini described in 2017, in the International Journal of Community Currency Research, what sets Sardex apart from other mutual credit systems: the design of the system, its aim of keeping economic and social goals in balance, and a federated way of growing.

This growth is documented. According to a report in Forbes Italia, the model had reached eleven other Italian regions by 2018. In 2025 RSI named networks of their own in Piedmont, Lombardy, Lazio, Veneto and Abruzzo and reported that trade worth a total of one billion euros had passed through Sardex by 2024, with more than 45,000 active users. Besides small and medium-sized businesses, RSI now counts freelancers, employees and consumers among them.

Other examples

Chiemgauer. The best-known local money in the German-speaking world began in 2003 as a school project at the Waldorf school in Prien am Chiemsee, initiated by the teacher Christian Gelleri. One Chiemgauer is worth one euro. So that the money is not hoarded, it loses value over time; as of 2012 the loss was two percent after three months. Whoever changes Chiemgauer back into euros pays a fee of five percent, most of which goes to non-profit associations in the region. In 2012, according to a report in the Deutsche Handwerks Zeitung, 596 businesses in the districts of Rosenheim and Traunstein accepted the Chiemgauer.

Brixton Pound. In the London district of Brixton, the initiative Transition Town Brixton issued a currency of its own in September 2009. It was valid only in Brixton and was meant to keep residents' money in the neighbourhood.

Bristol Pound. On 19 September 2012 Bristol became the first city in the United Kingdom to launch its own currency, with notes and an electronic form of payment. After nearly a decade the scheme ended: in 2021 the Bristol Pound was withdrawn from circulation, and anyone still holding notes could return them by the end of September or donate their value.

Limits and common misunderstandings

More money does not mean more value. A local currency creates no goods. It helps existing goods and work find each other more easily when ordinary money is scarce.

Trust is the real backing. A mutual credit circuit holds only as long as members trust that their balances are worth something within the circle. A member that is in the negative and no longer offers anything weakens this trust.

Small and well tended. A circle needs enough different offers for balances to be spent, and an organisation that keeps the accounts, supports members and recognises imbalances. That takes work, as the end of the Bristol Pound has shown.

Local currencies in permaculture

Bill Mollison ended Permaculture: A Designers' Manual in 1988 with a chapter on strategies for an alternative nation, in which he looked at money, land and work with the same design thinking he applied to a garden. David Holmgren lists finance and economics as a domain of its own in his permaculture flower. A local currency is one of the invisible structures: it does not shape soil, but it shapes the paths along which goods and work flow in an area.

It keeps yields in the region, as the principle obtain a yield asks of a place. It grows best in the way small and slow solutions describe, circle by circle rather than in one leap. And it is related to the commons and to community supported agriculture: in all three cases people manage something shared by rules they give themselves. How such rules can come about in a group is shown by sociocracy. In the language of the three ethics of permaculture, a mutual credit circuit is one way of putting people care and fair share into practice.

How Terra Humana understands local currencies

Terra Humana does not use a local currency and does not run a mutual credit system. We describe the topic because it belongs to permaculture and because a widely studied example was born in Sardinia. Sardex shows how the businesses of a region can give each other credit when bank credit is scarce. The studies on it turn attention to what carries such circles: trust among members and rules they shape together.