The definition of currency is money in any form when in actual use or circulation as a medium of exchange, especially circulating notes and coins. Currency can also refer to the general concept of money, which is anything that serves as a medium of exchange,
store of value and unit of account. The main functions of currency are to provide an accounting unit for measuring the price of goods.
Currency is a medium of exchange for goods and services. In short, it is money in the form of paper and coin, usually issued by a government and generally accepted at face value as a method of payment. Currency is the primary medium of exchange in the modern world, having long since replaced barter as the means of trading goods and services.
In the 21st century, a new form of currency has entered the lexicon and realm of exchange: virtual currency, also known as cryptocurrency. Virtual currencies, such as Bitcoin and Ethereum, have no physical form or government backing in the United States. They are traded and stored electronically.
Currency in some form has been used for at least 3000 years. Once only in the form of coins, currency proved crucial in facilitating trade between continents.
A key feature of modern currency is that it is useless in itself. This means that banknotes are pieces of paper and not coins made of gold, silver or bronze.
The concept of using paper as currency may have been developed in China as early as 1000 BC, but the acceptance of a piece of paper in exchange for something of intrinsic value took a long time to take hold. Modern currencies are issued on paper in various denominations, with fractional issues in the form of coins.
The terms money and currency are often thought to mean the same thing. However, although they are related, they have different meanings.
Money is a broader term that refers to an intangible system of values that makes the exchange of goods and services possible now and in the future. Currency is simply a tangible form of money.
Money is used in different ways, all related to its future use in some kind of transaction. For example, money is a store of value. That is, it has and maintains a certain value that supports the current exchange. People know that the money they received today will essentially have the same value next week when they need to make a purchase or pay a bill.
Money is also called a unit of account. This means it can be used to account for changes in the value of items over time. Businesses use money as a unit of account when budgeting or assigning value to assets. Profits and losses are established and relied upon using cash as the unit of account.
Money also has certain properties that allow the smooth exchange of goods:
The United States Mint defines currency as money in the form of paper and coins used as a medium of exchange. Currencies are created and distributed by individual countries around the world.
U.S. paper currency is issued by the Bureau of Engraving and Printing as $1, $2, $5, $10, $20, $50, and $100 bills. The $500, $1,000, $5,000 and $10,000 notes are no longer issued, but those still in circulation can be redeemed at their full face value.
Currency issued in 1861 or earlier is no longer valid and cannot be redeemed at its full face value. U.S. currency in coin form is issued by the Mint in denominations of 1¢, 5¢, 10¢, 25¢, 50¢, and $1.
More than 200 national currencies are currently in circulation. Including the US, 42 countries use the US dollar or peg their currencies directly to it. According to the International Monetary Fund (IMF), the dollar accounts for 58.8% of foreign exchange reserves.
Most countries issue their own currencies. For example, Switzerland’s official currency is the Swiss franc and Japan’s is the yen. The exception is the euro, which has been adopted by most countries that are members of the European Union.