Private currency

Private currency

A private currency is a currency issued by a private organization. It is often contrasted with fiat currency issued by governments or central banks. In many countries, the issue 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 private gold and silver exchanges, local paper money, computerized systems of credits and debits, and electronic currencies in circulation, such as digital gold currency.



United States

A private $1 note, issued by the "Delaware Bridge Company" of New Jersey 1836-1841.

In the United States, the Free Banking Era lasted between 1837 and 1866, when almost anyone could issue paper money. While there are more restrictions today than in this era, it is still legal to create your own currencies. States, municipalities, private banks, railroad and construction companies, stores, restaurants, churches and individuals printed an estimated 8,000 different monies by 1860 and can still do so today. 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. Yet according to Lawrence H. White's article in The Freeman, "it turns out that 'wildcat' banking is largely a myth. Although stories about crooked banking practices are entertaining—and for that reason have been repeated endlessly by textbooks—modern economic historians have found that there were in fact very few banks that fit any reasonable definition of wildcat bank".[1] The National Bank Act of 1863 ended the "wildcat bank" period.

Ithaca hours

The city of Ithaca in Western New York State has experimented with barter in which participating workers exchange services for Ithaca Hours which are used to buy goods and services forming a subprivate currency for a small locality. The system has been ruled legal provided all transactions are taxed and all currency is redeemable in United States Dollars.


BerkShares is a local currency that circulates in The Berkshires region of Massachusetts. It was launched 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.

United States Private Dollars

In 2007, Angel Cruz, founder of The United Cities Corporation (TUC) in one of the dramatic abuses of the use of private currencies, announced he was establishing an alternative "asset based" currency named "United States Private Dollars".[2] Cruz claimed his "United States Private Dollars" were "backed by the total net worth of the assets of its members" and had printed $6,127,379,895 worth of the private currency.[3] According to a press release, these assets were $357,170,993,418.[4] The currency featured the slogan "In Jehovah We Trust".[5]

Several of Cruz's employees stated that they had been promised a 30-year contract, a new car, health insurance and payment of their debts. The workers received compensation in the form of checks from United Cities. Those checks were rejected as fraudulent by local banks after the employees deposited them because they lacked standard routing numbers.[6]

The U.S. Treasury Department's Office of the Comptroller of the Currency issued an alert warning banks that United Cities' checks were "valueless instruments" and should not be cashed.[7]

On July 8, 2007, Cruz attempted to evict employees of a Palmetto Bay, Florida branch of the Bank of America. He was accompanied by 30 of his followers, 10 of whom were dressed as armed guards, and he presented a "court order" supposedly issued by "The United Cities Private Court." The "court order" referenced a pending $15.25 billion lawsuit against the Bank of America filed by Cruz in Miami-Dade County Court the month before. Cruz had claimed the bank had wronged him because an Orlando branch of Bank of America refused to cash $14.3 million in United Cities "bank drafts."[8]

On August 6, 2008, Cruz was indicted by a Federal grand jury in Florida on one count of conspiracy to defraud the United States under 18 U.S.C. § 1344 and 18 U.S.C. § 371 and six counts of bank fraud under 18 U.S.C. § 1344 and 18 U.S.C. § 2 in connection with his dealings with Bank of America with the United Cities bank drafts.[9] If convicted, Cruz would face a maximum possible sentence of up to 185 years in federal prison.[10]

As of late October 2010, the Assistant United States Attorney in Orlando, Florida filed a report with the U.S. District Court to the effect that Angel Cruz was still a fugitive, and that the United States Secret Service was continuing its efforts to apprehend Cruz.[11] A co-defendant in the case, Harry William Marrero, was sentenced on September 1, 2009 to eight years and one month in prison.[12] Marrero is incarcerated at the United States Penitentiary at Atlanta, Georgia, and with time off for good behavior would be scheduled for release on September 7, 2015.[13]

Liberty Dollars

In other countries

Private currency issued in Australia by The City Bank of Sydney circa 1900.

In Australia, the Bank Notes Tax Act of 1910 basically shut down the circulation of private currencies by imposing a prohibitive tax on the practice. Many other nations have similar such policies that eliminate private sector competition.

One example of a currency that lost government support but retained use amongst a community is the Iraqi Swiss dinar.

England has had the Totnes pound since it was launched by Transition Towns Totnes Economics and Livelihoods group in March 2007; A Totnes Pound is equal to one pound sterling and is backed by sterling held in a bank account. As at September 2008, about 70 business in Totnes were accepting the Totnes Pound.

There are also the Lewes Pound (from September 2008) and the Stroud Pound (from 12 September 2009).

Austria had the Wörgl Experiment from July 1932 to September 1933.

Currently, Bavaria Germany has the Chiemgauer, started in 2003.

Starting in 2006 the "City Initiative Karlsruhe" issues the Karlsruher which has no nominal value. Every coin has the value of 50 Eurocent and is primarily used in parking garages. As of 2009, 120 companies in Karlsruhe accept the Karlsruher and usually grant a discount when paying with it.[14]

In Hong Kong although the government does issue currency, bank issued private currency is the dominant medium of exchange. Most automated teller machines dispense private Hong Kong bank notes.[15]

In Canada private currencies cannot be referred to being legal tender (Calgary Dollar and Toronto dollar) or use alternate names like coupon or bucks (e.g. Canadian Tire money and Pioneer Energy#Bonus Bucks).

Currency backing

Today many private currencies are backed by a commodity to increase asset security and nullify inflation, which can be caused by an issuer increasing money supply. Some use established and historic forms of money, such as silver or gold, as in the case of digital gold currencies or the Liberty dollar.

It is possible for privately issued money to be backed by any commodity, although some people argue that perishable goods can never be used as currency, other than in bartering.[citation needed] One criterion that is regarded as critical for any currency backing material is its fungibility. Alternative views suggest paper money backed by energy (measured for example in "joules of electricity" or "joules of oil"), transport (measured in kg·km/h), or food for instance, may be used in the future.

Private currency vs. private money

Private currency is the opposite of the fiat currency while private money, in monetary economics, is the money supply created by private/commercial bank; in business, is the finance source other than bank.[citation needed]

See also


  1. ^ White, Lawrence H. "Banking Without Regulation", The Freeman, V. 43, N. 10, October 1993.
  2. ^ "Florida man launches 'United States Private Dollar'", Daily Kos, August 25, 2007.
  3. ^ "TUC Currencies", United Cities website, via Internet Archive
  4. ^ "TUC Improving the US Economy by the Circulation of Their Private Currency Today", August 2, 2007
  5. ^ "Kissimmee nonprofit 'concerned' over checks", Orlando Sentinel, August 25, 2007
  6. ^ "Embattled company ups the ante", Orlando Sentinel, September 1, 2007
  7. ^ "Kissimmee nonprofit 'concerned' over checks", Orlando Sentinel, August 25, 2007
  8. ^ Casey Sanchez, "Return of the Sovereigns," Spring 2009, Issue 133, Southern Poverty Law Center, at [1].
  9. ^ Indictment, United States v. Cruz, case no. 6:08-cr-00177-UA-DAB, docket entry 1, Aug. 6, 2008, U.S. District Court for the Middle District of Florida (Orlando Div.).
  10. ^ News Release, Aug. 22, 2008, "Orlando and Miami Men Indicted for Bank Fraud," U.S. Dep't of Justice, at [2].
  11. ^ Status Report, United States v. Cruz, case no. 6:08-cr-00177-UA-DAB, docket entry 88, Oct. 28, 2010, U.S. District Court for the Middle District of Florida (Orlando Div.).
  12. ^ Judgment, United States v. Marrero, case no. 6:08-cr-00177-UA-DAB, docket entry 75, Sept. 1, 2009, U.S. District Court for the Middle District of Florida (Orlando Div.).
  13. ^ Harry William Marrero, inmate # 17525-018, Federal Bureau of Prisons, U.S. Dep't of Justice, at [3].
  14. ^
  15. ^ International Bank Note Society. "Hong Kong's 1,000 (HSBC) dollar note".

Further reading

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