The Benefits of Complementary Currencies using Existing Money

Kevin Cox
3 min readJan 9, 2022


A tax in British Currency in the American Colonies triggered the American War of Independence. The Colonies did not like the tax particularly when they had to rent money from the British to pay the tax. Many communities have come to the same conclusion. Why are they paying people outside their communities to use a common public currency?

The rise of crypto-currencies and local currencies are attempts by communities to solve the issue. The idea is to create complementary currencies and gain the advantages outlined in “8 Good Reasons to Use a Local Complementary Currency”. Communities understand there is a price to pay for using other people’s money, and if they can, they would like to use their own money, and if they have to pay to use it, at least the money comes back to them.

Banks and Money Lenders know that there is a profit in renting out currencies with loans. The financial system builds on this idea. Every loan made, every share issued, every derivative created uses the same idea. Create Capital through a form of loan and rent out the money.

There are ways to remove rent on money, such as mutual credit schemes. You lend me your money for no charge, and I will lend you mine in return. These work well with stable situations and a high degree of community trust.

Another way to remove rent on money is to prepay for goods and services and get a return with a discount when paying with prepayments. Like mutual credit, this works well when there is a long-lasting relationship and trust between buyers and sellers. Communities who wish to invest in long-lasting infrastructure used by most members can use this approach and get the advantages of a complementary currency without the cost of creating and maintaining a separate currency.

Prepayments reduce the amount of money exchanged to produce the same goods and services. Assume there is $1,000,000 worth of goods and services produced each year for an investment of $10,000,000. Assume the cost of money is 5% per annum and assume the investment lasts for 20 years. The total extra cost is $500,000 worth of money per year for 20 years or $10,000,000 extra. With loans the cost of producing the goods and services is $10,000,000 plus $10,000,000 or $20,000,000.

With prepayments, the total money exchanged is $10,000,000. Hence a community that uses prepayments as Capital instead of loans will get the same amount of goods and services and exchange less money.

Prepayments give all the advantages of local currencies, crypto-currencies, and mutual credit without changing the operation of an existing economy. Everything except the unnecessary creation of money stays the same except local investments give higher economic returns.

Prepayments with discounts remove unnecessary money and are analogous to a frictionless physical system. Removing rent on money or debt makes an economic activity more efficient. For many economic activities, it is possible to replace debt with prepayments.

Prepayments are simple to implement. Any government or business can replace debt with prepayment investments. The prepayments pay the debt back to lenders who can recycle the money back as prepayment investments.

A prepayment is Capital. When a prepayment pays for something, the Capital still exists and transfers to the buyer. Over time it means some, not all, Capital transfers to consumers. Consumers, in turn, recycle Capital for the next generation of consumers.

Workers and new investors can contribute prepayment capital. They contribute to the ongoing governance to which their ownership of Capital entitles them. Prepayments create a wealth-producing system governed by all parties who contribute to its success. Debt produces a money generating system owned by parties who contribute money.

Prepayment capital needs long-lasting and trusted relationships to work well. It needs transparent and trusted governance and ways to ensure participants comply with the rules.

We can use the approach to address the climate crisis. Investments and wealth that are detrimental to human existence on the planet — like burning fossil fuel are swapped for prepayments in beneficial investments like renewable energy or extracting greenhouse gases with excess renewable energy to produce saleable products.

We can use the same approach to find invest funds to address other issues facing humankind and local communities.



Kevin Cox

Kevin works on empowering individuals within local communities to rid the economy of unearned income.