I think the reason it's frowned upon is due to tax evasion reasons. Imagine paying your employees in this town's currency and then having them spend it within the town.
You could pay them under the table (not report it to the government) in cold hard cash using the British pound just as easily as using a local currency. I can't see how using a local currency would make it any easier.
If you take it to the extreme and consider a barter system. I can be a farmer and give a few tomatoes to the barber who cuts my hair. The government does not know what happened and you do not report the income as earned.
You are right that it's identical to paying under the table but I think there is a higher incentive to do that with these town currencies.
Thanks for making me rethink my logic.