By Mona Naqvi and James Southgate of the Bank’s Notes Division.
A few towns and cities in the United Kingdom have set up local currency schemes to promote local sustainability. The schemes issue paper instruments with some similar design features to banknotes. This article explains how these instruments differ from banknotes. The size, structure and backing arrangements of existing schemes mean that local currencies are unlikely to pose a risk to the Bank’s monetary and financial stability objectives. Nonetheless, consumers should be aware that local currency instruments do not benefit from the same level of consumer protection as banknotes.
Banknotes, local currencies and central bank objectives