Every few years, someone proposes a new kind of money — gold-backed, community-based, or digital — claiming it could fix what is broken in our financial system. Yet national currencies always seem to win. Why? Is it because laws forbid alternatives, or because power does?
That is the question explored in my paper Introducing Good Money: Legal Tender Problem or Question of Structured Approach? published in DANUBE: Law and Economics Review.
The Myth of the Legal Barrier
Critics of national currencies often point fingers at “legal tender laws,” claiming they force people to accept state-issued money and block innovation. But when I looked closer, the story was different.
Legal tender laws, I found, simply ensure that a debt can be settled in the official currency — they do not prohibit people from using something else. In fact, alternative systems like Switzerland’s WIR Bank or Local Exchange Trading Systems (LETS) operate legally, providing credit and stability to small businesses.
The law, in most countries, is not the wall people think it is.
The Real Roadblock: Politics and Power
If the law allows it, why do alternatives still struggle? Because money is never just economics — it is politics.
History is full of examples where successful alternative moneys were shut down. The Austrian town of Wörgl, for example, issued its own local currency in the 1930s to fight unemployment — and it worked. The economy recovered, people found jobs, and trade revived. Then the central bank banned it.
In the United States, the Liberty Dollar, a private silver-based currency, was declared a federal crime. Even Switzerland’s WIR, though legal, operates under tight central bank supervision.
The message is clear: the greatest obstacle to “good money” is not the law—it is the control governments and central banks want to keep.
What It Takes to Introduce Good Money
Creating an alternative currency is not a utopian dream. But it requires discipline, transparency, and a plan.
Four things matter most:
- System design – How the currency is issued and managed.
- Management quality – Whether it is trustworthy and professional.
- Implementation strategy – How users are attracted and retained.
- Context and timing – Crises often make people open to change.
o these, I add a fifth: legal compliance.
In many countries, it is possible to issue a local or private medium of exchange — if you understand and respect the law. Doing so protects innovators from unnecessary confrontation and builds legitimacy from the start.
Why This Matters Today
The debate over “good money” has not gone away — it has evolved. From community currencies to Bitcoin, the same question remains: can we design systems that are both decentralized and responsible?
My conclusion remains the same: legal tender laws are not the real enemy. The challenge is creating a structured, credible, and lawful alternative — one strong enough to earn people’s trust despite the political resistance.
Final Thought
Monetary change rarely begins with rebellion; it begins with structure.
When we treat “good money” not as an act of defiance but as an act of design, we open the door to real reform — one that balances freedom, stability, and fairness in how we exchange value.
Read the full study: Omerčević, E. (2014). Introducing good money: Legal tender problem or question of structured approach?Danube: Law and Economics Review, 5(1), 53–64.
