From TIME magazine:
Tough Times Lead to Local Currencies
With local economies flailing, communities across the U.S. are trying to drum up more action on Main Street. “Buy Local” campaigns are one way to go. But many towns—from Ojai, Calif., to Greensboro, N.C.—are considering going a step further and printing money that can only be spent locally.
Issuing an alternative currency is perfectly legal, as long as it is treated as taxable income and consists of paper bills rather than coins. In the U.S., where local currencies were popular during the Depression, the biggest alterna-cash system is in Massachusetts’ Berkshire County. Go to one of several banks there, hand a teller $95 and get back $100 worth of BerkShares, a nice little discount designed to reel in users.