Local currency holds promise for relieving poverty while enhancing social capital and helping communities meet goals. In spite of this, governmental policies have created barriers to its full success. This article examines local currency from a community development perspective, reviews the policy environment in the United States, and identifies policy changes that can support local currencies. Four major types of local currency—proxy, fiat, local exchange trading systems, and time banks—are described. Federal policy barriers in the US Constitution, statutes, and tax regulations as well as state prohibitions to local currency are examined.

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