The California Alternative Currencies Act (AB-129) updates California Corporations Code Section 107 to clarify that the issuance and use of alternative currencies is not prohibited in California.
This is an important clarification. The existing language of Corporations Code Section 107 is ambiguous and outdated, and might be interpreted to prohibit the creation and circulation of alternative forms of exchange - including community currencies, virtual currencies, frequent flier miles, rewards point systems, and other widely used and emerging forms of exchange.
After nearly two years of advocacy, Sustainable Economies Law Center and supporters across California are happy to see this outdated law clarified. If passed, California may go from one of the only states to potentially prohibit alternative currencies to the first state to explicitly acknowledge them!
Creating a Resilient Monetary System
Our centralized monetary system is fundamentally flawed. 97% of our money supply is put into circulation as debt by private for-profit banks, who control where that money first enters our economy. The vast majority of money flows toward housing and financial services when created by these banks as loans, bypassing the productive economy that provides essential livelihoods, goods, and services to communities. And once some of these Federal Reserve notes find their way into our communities, they tend to flow back out again through taxes and profits to out-of-town corporations. The US has one of the highest wealth inequality rates in the modern world: 93% of monetary wealth is owned by just 20% of the US population.
Communities across California, across the US, and across the world are creating their own forms of exchange that:
- keep wealth circulating locally,
- allow local businesses and community members to continue exchanging essential goods and services,
- promote community cohesion by re-grounding economic relationships in real human connections, and
- are designed to solve specific social, environmental, and economic problems.
As part of a larger strategy to reform our monetary system, community currencies can make our local economies much more resilient to economic volatility, effectively empower economically-marginalized populations with an inclusive and accessible form of exchange, and contribute to the movement for economic democracy by giving communities the power to design and issue their own currencies!
How you can get involved
SELC has been advocating for this bill for nearly two years, and we need your support to finally make sure it becomes law! If you or your organization would like to express support for this bill:
Download a template letter here and take a few minutes to make the letter personal and unique to your or your organization's perspective. Make any and all changes to the template that you'd like. At the very least, please add a few sentences about your organization and why this legislation is important to you.
Print and mail signed letters to:
Senator Noreen Evans, Chair
Senate Banking and Financial Institutions Committee
Attn: Eileen Newhall
State Capitol Room 405
Sacramento, CA 94249-0007
We encourage you to send copies of the letter to your Assemblymember and Senator as well. Don't know who your representatives are? Search here: http://findyourrep.legislature.ca.gov/
Q: How would a community currency strengthen our local economy?
A: Money can be understood in terms of its flow or its circulation within an economy. Every time a dollar is spent in your community, it allows for someone else to spend that dollar again somewhere else. In a resilient local economy, that dollar could be spent many times locally, maintaining and growing the wealth of that community. However, most of our dollars these days flow out of our communities as soon as they are used, enriching national and multinational companies far away from where the money is spent. A community currency is inherently limited to a particular place or group, so it incentives people to shop at locally-owned businesses and keeps wealth flowing within the community. This is called the multiplier effect.
Q: How are community currencies different from Bitcoin and other virtual currencies?
A: While Bitcoin is a potentially disruptive technology, it is primarily designed to be global and anonymous, while community currencies are designed to be rooted in a specific place and increase personal relationships. Likewise, Bitcoin's value is based in scarcity, and is subject to wild speculation and concentration in the hands of a few wealthy investors. Community currencies are designed to increase the circulation of goods and services and primarily function as a means of exchange, rather than an investment or store of value.
Q: Do I still have to pay taxes on purchases made with a community currency?
A: Complementary currencies are subject to sales and income tax in the same way that dollars are, and those taxes are always paid in dollars. Particularly with the development of electronic currencies, online accounting systems make it easy to keep track of one’s expense, manage an account, and prevent tax evasion.
Q: Where can I find out more?
A: There are a variety of online resources with more information on local currencies. Visit these links for more information:
CommunityCurrenciesLaw - Sustainable Economies Law Center’s online legal resource library containing further information and links to a wide range of resources considering the legal aspects of community currencies and barter systems.
PluggingTheLeaks.org - Resources developed by the UK-based New Economics Foundation exploring the dynamics of a local economy and how currencies either keep money circulating locally or allow it to leak out.
Schumacher Center for a New Economics - Reference material, publications, and a directory of currencies across the US from the founders of the BerkShare.
Lietaer.com - Homepage of Bernard Lietaer, one of the world’s foremost experts on community currencies and monetary systems.
For more resources and references, visit our Resources page at CommunityCurrenciesLaw.org