HOME
TheInfoList



A banknote (often known as a bill (in the US and Canada), paper money, or simply a note) is a type of negotiable
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of mo ...
, made by a
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because b ...
or other licensed authority, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally required to redeem the notes for legal tender (usually gold or silver coin) when presented to the chief cashier of the originating bank. These commercial banknotes only traded at face value in the market served by the issuing bank. Commercial banknotes have primarily been replaced by national banknotes issued by
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ...
s or monetary authorities. National banknotes are often – but not always –
legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in paym ...
, meaning that courts of law are required to recognize them as satisfactory payment of money
debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The deb ...

debt
s. Historically, banks sought to ensure that they could always pay customers in
coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to ...
s when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ...
s backing their currencies in gold or silver. Today, most national currencies have no backing in precious metals or commodities and have value only by
fiat#REDIRECT Fiat#REDIRECT Fiat {{Redirect category shell, 1= {{R from acronym ...
{{Redirect category shell, 1= {{R from acronym ...
. With the exception of non-circulating high-value or precious metal issues,
coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to ...
s are used for lower valued monetary units, while banknotes are used for higher values. In
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population of around 1.4 billion. Covering approximately 9.6 million square kilometers (3.7 million m ...
during the
Han dynasty The Han dynasty () was the second imperial dynasty of China (202 BC – 220 AD), established by the rebel leader Liu Bang and ruled by the House of Liu. Preceded by the short-lived Qin dynasty (221–206 BC) and a warring interregnum known a ...
,
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of mo ...
s appeared in 118 BC and were made of leather.
Rome , established_title = Founded , established_date = 753 BC , founder = King Romulus , image_map = Map of comune of Rome (metropolitan city of Capital Rome, region Lazio, Italy).svg , map_caption = The territo ...
may have used a durable lightweight substance as promissory notes in 57 AD which have been found in
London London is the capital and largest city of England and the United Kingdom. The city stands on the River Thames in the south-east of England, at the head of its estuary leading to the North Sea. London has been a major settlement for two millen ...
. However,
Carthage Carthage was the capital city of the ancient Carthaginian civilization, on the eastern side of the Lake of Tunis in what is now Tunisia. Carthage was the most important trading hub of the Ancient Mediterranean and one of the most affluent cities o ...
was purported to have issued bank notes on parchment or leather before 146 BC. Hence Carthage may be the oldest user of lightweight promissory notes. The first known banknote was first developed in China during the
Tang Tang or TANG usually refers to: * Tang dynasty * Tang (drink mix) Tang or TANG may also refer to: Chinese states and dynasties * Jin (Chinese state) (11th century – 376 BC), a state during the Spring and Autumn period, called Tang (唐) befor ...
and
Song A song is a musical composition intended to be performed by the human voice. This is often done at distinct and fixed pitches (melodies) using patterns of sound and silence. Songs contain various forms, such as those including the repetition a ...
dynasties, starting in the 7th century. Its roots were in merchant
receipt A receipt (also known as a packing list, packing slip, packaging slip, (delivery) docket, shipping list, delivery list, bill of parcel, manifest or customer receipt) is a document acknowledging that a person has received money or property in pay ...
s of deposit during the Tang dynasty (618–907), as
merchants A merchant is a person who trades in commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in business or trade. Merchants have operated for as long as industry, ...
and
wholesale Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In gener ...
rs desired to avoid the heavy bulk of copper coinage in large commercial transactions. During the
Yuan dynasty#REDIRECT Yuan dynasty {{R from move ...
(1271–1368), banknotes were adopted by the
Mongol Empire The Mongol Empire of the 13th and 14th centuries was the largest contiguous land empire in history and the second largest empire by landmass, second only to the British Empire. Originating in Mongolia in East Asia, the Mongol Empire eventually ...
. In Europe, the concept of banknotes was first introduced during the 13th century by travelers such as
Marco Polo Marco Polo (; ; ; September 15, 1254January 8, 1324) was a Venetian merchant, explorer, and writer who travelled through Asia along the Silk Road between 1271 and 1295. His travels are recorded in ''The Travels of Marco Polo'' (also known as ...
, with European banknotes appearing in 1661 in Sweden.
Counterfeit Office of Field Operations agent checking the authenticity of a travel document at an international airport using a stereo microscope To counterfeit means to imitate something authentic, with the intent to steal, destroy, or replace the origina ...
ing, the
forgery Forgery is a white-collar crime that generally refers to the false making or material alteration of a legal instrument with the specific intent to defraud anyone (other than themself). Tampering with a certain legal instrument may be forbidden ...
of banknotes, is an inherent challenge in issuing
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins. ...
. It is countered by anticounterfeiting measures in the
printing Printing is a process for mass reproducing text and images using a master form or template. The earliest non-paper products involving printing include cylinder seals and objects such as the Cyrus Cylinder and the Cylinders of Nabonidus. The ear ...
of banknotes. Fighting the counterfeiting of banknotes and
cheque A cheque, or check (American English; see spelling differences), is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing the chequ ...
s has been a principal driver of
security printing Security printing is the field of the printing industry that deals with the printing of items such as banknotes, cheques, passports, tamper-evident labels, security tapes, product authentication, stock certificates, postage stamps and identity card ...
methods development in recent centuries.


History

Paper currency first developed in
Tang dynasty The Tang dynasty (, ; ), or Tang Empire, was an imperial dynasty of China that ruled from 618 to 907, with an interregnum between 690 and 705. It was preceded by the Sui dynasty and followed by the Five Dynasties and Ten Kingdoms period. His ...
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population of around 1.4 billion. Covering approximately 9.6 million square kilometers (3.7 million m ...
during the 7th century, although true paper money did not appear until the 11th century, during the
Song dynasty The Song dynasty (; ; 960–1279) was an imperial dynasty of China that began in 960 and lasted until 1279. The dynasty was founded by Emperor Taizu of Song following his usurpation of the throne of the Later Zhou, ending the Five Dynasties and ...
. The usage of paper currency later spread throughout the
Mongol Empire The Mongol Empire of the 13th and 14th centuries was the largest contiguous land empire in history and the second largest empire by landmass, second only to the British Empire. Originating in Mongolia in East Asia, the Mongol Empire eventually ...
or
Yuan dynasty#REDIRECT Yuan dynasty {{R from move ...
China. European explorers like
Marco Polo Marco Polo (; ; ; September 15, 1254January 8, 1324) was a Venetian merchant, explorer, and writer who travelled through Asia along the Silk Road between 1271 and 1295. His travels are recorded in ''The Travels of Marco Polo'' (also known as ...
introduced the concept in Europe during the 13th century.
Napoleon Napoléon Bonaparte (15 August 1769 – 5 May 1821) was a French military and political leader. He rose to prominence during the French Revolution and led several successful campaigns during the Revolutionary Wars. As Napoleon I, he was Empe ...
issued paper banknotes in the early 1800s. Cash paper money originated as receipts for value held on account "value received", and should not be conflated with promissory "sight bills" which were issued with a promise to convert at a later date. The perception of banknotes as money has evolved over time. Originally, money was based on
precious metals Precious metals are rare, naturally occurring metallic chemical elements of high economic value. Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lustre. H ...
. Banknotes were seen by some as an I.O.U. or
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of mo ...
: a promise to pay someone in precious metal on presentation (see
representative money Representative money is any medium of exchange, often printed on paper, that represents something of value, but has little or no value of its own (intrinsic value). Unlike some forms of fiat money (which may have no commodity backing), genuine rep ...
). But they were readily accepted - for convenience and security - in
London London is the capital and largest city of England and the United Kingdom. The city stands on the River Thames in the south-east of England, at the head of its estuary leading to the North Sea. London has been a major settlement for two millen ...
, for example, from the late 1600s onwards. With the removal of precious metals from the monetary system, banknotes evolved into pure
fiat money Fiat money is a currency (a medium of exchange) established as money, often by government regulation. Fiat money does not have intrinsic value and does not have use value. It has value only because a government maintains its value, or because p ...
.


Early Chinese paper money

The first banknote-type instrument was used in
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population of around 1.4 billion. Covering approximately 9.6 million square kilometers (3.7 million m ...
in the 7th century, during the
Tang dynasty The Tang dynasty (, ; ), or Tang Empire, was an imperial dynasty of China that ruled from 618 to 907, with an interregnum between 690 and 705. It was preceded by the Sui dynasty and followed by the Five Dynasties and Ten Kingdoms period. His ...
(618–907). Merchants would issue what are today called
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of mo ...
s in the form of
receipt A receipt (also known as a packing list, packing slip, packaging slip, (delivery) docket, shipping list, delivery list, bill of parcel, manifest or customer receipt) is a document acknowledging that a person has received money or property in pay ...
s of deposit to
wholesaler Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In gener ...
s to avoid using the heavy bulk of copper coinage in large commercial transactions. Before the use of these notes, the Chinese used coins that were circular, with a rectangular hole in the middle. Coins could be strung together on a rope. Merchants, if they were rich enough, found that the strings were too heavy to carry around easily, especially for large transactions. To solve this problem, coins could be left with a trusted person, with the merchant being given a slip of paper (the receipt) recording how much money they had deposited with that person. When they returned with the paper to that person, their coins would be returned. True paper money, called "
jiaozi ''Jiaozi'' ( zh, 餃子; ) are a Chinese dumpling commonly eaten in China and other parts of East Asia. They are one of the major dishes eaten during the Chinese New Year and year-round in the northern provinces. Though considered part of Chin ...
", developed from these promissory notes by the 11th century, during the
Song dynasty The Song dynasty (; ; 960–1279) was an imperial dynasty of China that began in 960 and lasted until 1279. The dynasty was founded by Emperor Taizu of Song following his usurpation of the throne of the Later Zhou, ending the Five Dynasties and ...
. By 960, the Song government was short of copper for striking coins, and issued the first generally circulating notes. These notes were a promise by the ruler to redeem them later for some other object of value, usually
specie Specie may refer to: * Coins or other metal money in mass circulation * Bullion coins * Hard money (policy) * Commodity money * Specie Circular, 1836 executive order by US President Andrew Jackson regarding hard money * Specie Payment Resumption Act ...
. The issue of credit notes was often for a limited duration, and at some discount to the promised amount later. The ''jiaozi'' did not replace coins but was used alongside them. The central government soon observed the economic advantages of printing paper money, issuing a monopoly for the issue of these certificates of deposit to several deposit shops. By the early 12th century, the amount of banknotes issued in a single year amounted to an annual rate of 26 million strings of cash coins. By the 1120s the central government started to produce its own state-issued paper money (using
woodblock printing Woodblock printing or block printing is a technique for printing text, images or patterns used widely throughout East Asia and originating in China in antiquity as a method of printing on textiles and later paper. As a method of printing on cl ...
). Even before this point, the Song government was amassing large amounts of paper
tribute Objects in the "Apadana" reliefs at Persepolis: armlets, bowls, and ''amphorae'' with griffin handles are given as tribute. A tribute (/ˈtrɪbjuːt/) (from Latin ''tributum'', contribution) is wealth, often Gifts in kind, in kind, that a par ...
. It was recorded that each year before 1101, the prefecture of Xin'an (modern Shexian,
Anhui Anhui (; formerly romanized as Anhwei) is a landlocked province of the People's Republic of China, part of the East China region. Its provincial capital and largest city is Hefei. The province is located across the basins of the Yangtze River and ...
) alone would send 1,500,000 sheets of paper in seven different varieties to the capital at Kaifeng. In 1101, the
Emperor Huizong of Song Emperor Huizong of Song (7 June 1082 – 4 June 1135), personal name Zhao Ji, was the eighth emperor of the Song dynasty in China. He was also a very well-known calligrapher. Born as the 11th son of Emperor Shenzong, he ascended the throne in ...

Emperor Huizong of Song
decided to lessen the amount of paper taken in the tribute quota, because it was causing detrimental effects and creating heavy burdens on the people of the region. However, the government still needed masses of paper product for the exchange certificates and the state's new issuing of paper money. For the printing of paper money alone, the Song government established several government-run factories in the cities of
Huizhou Huizhou ( zh, c= ) is a city in southeast Guangdong Province, China, forty three miles north of Hong Kong. It forms part of the Pearl River Delta megalopolis. Huizhou borders the provincial capital of Guangzhou to the west, Shenzhen and Dongguan ...
,
Chengdu Chengdu (Sichuanese pronunciation: , Standard Mandarin pronunciation: , , ), alternatively romanized as Chengtu, is a sub-provincial city which serves as the capital of the Chinese province of Sichuan. It is one of the three most-populous c ...
,
Hangzhou Hangzhou (, , Standard Mandarin pronunciation: ), also romanized as Hangchow, is the capital and most populous city of Zhejiang, People's Republic of China. It sits at the head of Hangzhou Bay, which separates Shanghai and Ningbo. Hangzhou gr ...
, and Anqi. The workforce employed in these paper money factories was quite large; it was recorded in 1175 that the factory at Hangzhou alone employed more than a thousand workers a day. However, the government issues of paper money were not yet nationwide standards of currency at that point; issues of banknotes were limited to regional areas of the empire, and were valid for use only in a designated and temporary limit of three years. The geographic limitation changed between 1265 and 1274, when the late southern Song government issued a nationwide paper currency standard, which was backed by gold or silver. The range of varying values for these banknotes was perhaps from one string of cash to one hundred at the most. Ever after 1107, the government printed money in no less than six ink colors and printed notes with intricate designs and sometimes even with mixture of a unique fiber in the paper to combat counterfeiting. The founder of the
Yuan dynasty#REDIRECT Yuan dynasty {{R from move ...
,
Kublai Khan Kublai (; mn, Хубилай, Hubilai; ; 23 September  1215 – 18 February 1294), also known as the Emperor Shizu of Yuan, was the fifth khagan-emperor of the Mongol Empire (''Ikh Mongol Uls''), reigning from 1260 to 1294 (although after the d ...
, issued paper money known as
Jiaochao Jiaochao () is a Chinese word for banknote first used for the currency of the Jurchen Jin dynasty and later by the Yuan dynasty. Jurchen Jin dynasty The Jurchens swept control over northern China, conquering the Liao dynasty and half of the So ...
. The original notes were restricted by area and duration, as in the Song dynasty, but in the later years, facing massive shortages of specie to fund their rule, the paper money began to be issued without restrictions on duration. Venetian merchants were impressed by the fact that the Chinese paper money was guaranteed by the State.


European explorers and merchants

According to a travelogue of a visit to Prague in 960 by
Ibrahim ibn Yaqub Abraham, ''Ibrāhīm''; el, Ἀβραάμ, translit=Abraám, name=, group= (originally Abram) is the common patriarch of the Abrahamic religions, including Judaism, Christianity, and Islam. In Judaism, he is the founding father of the covenant of ...
, small pieces of cloth were used as a means of trade, with these cloths having a set exchange rate versus silver. Around 1150, the
Knights Templar , colors = White mantle with a red cross , colors_label = Attire , march = , mascot = Two knights riding a single horse , equipment = , ...
would issue notes to pilgrims. Pilgrims would deposit valuables with a local Templar preceptory before embarking for the Holy Land and receive a document indicating the value of their deposit. They would then use that document upon arrival in the Holy Land to receive funds from the treasury of equal value. In the 13th century, Chinese paper money of Mongol Yuan became known in
Europe Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It comprises the westernmost peninsulas of the continental landmass of Eurasia, and is bordered by the Arctic Ocean to the north, the Atlant ...
through the accounts of travelers, such as
Marco Polo Marco Polo (; ; ; September 15, 1254January 8, 1324) was a Venetian merchant, explorer, and writer who travelled through Asia along the Silk Road between 1271 and 1295. His travels are recorded in ''The Travels of Marco Polo'' (also known as ...
and
William of Rubruck 250px, Voyage of William of Rubruck in 1253–1255 William of Rubruck ( nl, Willem van Rubroeck; la, Gulielmus de Rubruquis;  12481255), also known as Willem van Ruysbroeck, Guillaume de Rubrouck, or Willielmus de Rubruquis, was a Flemish Francis ...
. Marco Polo's account of paper money during the
Yuan dynasty#REDIRECT Yuan dynasty {{R from move ...
is the subject of a chapter of his book, ''
The Travels of Marco Polo ''Book of the Marvels of the World'' (Italian: ''Il Milione'', lit. "The Million", deriving from Polo's nickname "Emilione"), in English commonly called ''The Travels of Marco Polo'', is a 13th-century travelogue written down by Rustichello da Pi ...
'', titled " How the Great Kaan Causeth the Bark of Trees, Made into Something Like Paper, to Pass for Money All Over his Country." In
medieval In the history of Europe, the Middle Ages or medieval period lasted from the 5th to the late 15th century. It began with the fall of the Western Roman Empire and transitioned into the Renaissance and the Age of Discovery. The Middle Ages i ...
Italy Italy ( it, Italia ), officially the Italian Republic ( it, Repubblica Italiana, links=no ), is a country consisting of a continental part, delimited by the Alps, a peninsula and several islands surrounding it. Italy is located in Southern Europ ...
and
Flanders Flanders (, ; Dutch: ''Vlaanderen'' ; French: ''Flandre'' ; German: ''Flandern'' ) is the Dutch-speaking northern portion of Belgium and one of the communities, regions and language areas of Belgium. However, there are several overlapping defini ...
, because of the insecurity and impracticality of transporting large sums of cash over long distances, money traders started using
promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of mo ...
s. In the beginning these were personally registered, but they soon became a written order to pay the amount to whomever had it in their possession. These notes are seen as a predecessor to regular banknotes by some but are mainly thought of as proto bills of exchange and cheques.De Geschiedenis van het Geld (the History of Money), 1992, Teleac, page 96 The term "bank note" comes from the notes of the bank ("nota di banco") and dates from the 14th century; it originally recognized the right of the holder of the note to collect the precious metal (usually gold or silver) deposited with a banker (via a currency account). In the 14th century, it was used in every part of Europe and in Italian city-state merchants colonies outside of
Europe Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It comprises the westernmost peninsulas of the continental landmass of Eurasia, and is bordered by the Arctic Ocean to the north, the Atlant ...
. For international payments, the more efficient and sophisticated
bill of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a c ...
("lettera di cambio"), that is, a promissory note based on a virtual currency account (usually a coin no longer physically existing), was used more often. All physical currencies were physically related to this virtual currency; this instrument also served as credit.


Birth of European banknotes

The shift toward the use of these receipts as a means of payment took place in the mid-17th century, as the
price revolution The Price Revolution, sometimes known as the Spanish Price Revolution, was a series of economic events that occurred between the second half of the 15th century and the first half of the 17th century, and most specifically linked to the high rate of ...
, when relatively rapid gold inflation was causing a re-assessment of how money worked. The
goldsmith bankerA goldsmith banker was a business role that emerged in seventeenth century London from the London goldsmiths where they gradually expanded their services to include storage of wealth, providing loans, transferring money and providing bills of exchan ...
s of
London London is the capital and largest city of England and the United Kingdom. The city stands on the River Thames in the south-east of England, at the head of its estuary leading to the North Sea. London has been a major settlement for two millen ...
began to give out the receipts as payable to the ''bearer'' of the document rather than the original depositor. This meant that the note could be used as currency based on the security of the goldsmith, not the account holder of the goldsmith-banker. The bankers also began issuing a greater value of notes than the total value of their physical reserves in the form of loans, on the assumption that they would not have to redeem all of their issued banknotes at the same time. This pivotal shift changed the simple promissory note into an agency for the expansion of the monetary supply itself. As these receipts were increasingly used in the money circulation system, depositors began to ask for multiple receipts to be made out in smaller, fixed denominations for use as money. The receipts soon became a written order to pay the amount to whoever had possession of the note. These notes are credited as the first modern banknotes. The first short-lived attempt at issuing banknotes by a central bank was in 1661 by
Stockholms Banco Stockholms Banco (also known as the Palmstruch's Bank, in Swedish Palmstruchska banken) was the first European bank to print banknotes. It was founded in 1657 by Johan Palmstruch in Stockholm, began printing banknotes in 1661, but ran into financial ...
, a predecessor of Sweden's central bank
Sveriges Riksbank#REDIRECT Sveriges riksbank#REDIRECT Sveriges riksbank {{Redirect category shell, {{R from move ...
{{Redirect category shell, {{R from move ...
. These replaced the copper-plates being used instead as a means of payment. This banknote issue was brought about by the peculiar circumstances of the Swedish coin supply. Cheap foreign imports of
copper Copper is a chemical element with the symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pinkish-orang ...

copper
had forced
the Crown The Crown is the state in all its aspects within the jurisprudence of the Commonwealth realms and their subdivisions (such as Crown dependencies, overseas territories, provinces, or states). Legally ill-defined, the term has different meaning ...
to steadily increase the size of the copper coinage to maintain its value relative to
silver Silver is a chemical element with the symbol Ag (from the Latin ', derived from the Proto-Indo-European ''h₂erǵ'': "shiny" or "white") and atomic number 47. A soft, white, lustrous transition metal, it exhibits the highest electrical cond ...
. The heavy weight of the new coins encouraged merchants to deposit it in exchange for receipts. These became banknotes when the manager of the Bank decoupled the rate of note issue from the bank currency reserves. Three years later, the bank went bankrupt, after rapidly increasing the artificial money supply through the large-scale printing of paper money. A new bank, the '' Riksens Ständers Bank'' was established in 1668, but did not issue banknotes until the 19th century.


Permanent issue of banknotes

The modern banknote rests on the assumption that money is determined by a social and legal consensus. A gold coin's value is simply a reflection of the supply and demand mechanism of a society exchanging goods in a free market, as opposed to stemming from any intrinsic property of the metal. By the late 17th century, this new conceptual outlook helped to stimulate the issue of banknotes. The economist
Nicholas Barbon Nicholas Barbon ( 1640 – 1698) was an English economist, physician, and financial speculator. Historians of mercantilism consider him to be one of the first proponents of the free market. In the aftermath of the Great Fire of London, he b ...
wrote that money "was an imaginary value made by a law for the convenience of exchange." A temporary experiment of banknote issue was carried out by Sir
William Phips Sir William Phips (or Phipps; February 2, 1651 – February 18, 1695) was born in Maine in the Massachusetts Bay Colony and was of humble origin, uneducated, and fatherless from a young age but rapidly advanced from shepherd boy, to shipwright, sh ...
as the Governor of the
Province of Massachusetts Bay A province is almost always an administrative division within a country or state. The term derives from the ancient Roman ''provincia'', which was the major territorial and administrative unit of the Roman Empire's territorial possessions outside ...
in 1690 to help fund the war effort against France. The first bank to initiate the permanent issue of banknotes was the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of the ...

Bank of England
. Established in 1694 to raise money for the funding of the
war War is an intense armed conflict between states, governments, societies, or paramilitary groups such as mercenaries, insurgents, and militias. It is generally characterized by extreme violence, aggression, destruction, and mortality, using ...
against
France France (), officially the French Republic (french: link=no, République française), is a country primarily located in Western Europe, consisting of metropolitan France and several overseas regions and territories. The metropolitan area of Fr ...
, the bank began issuing notes in 1695 with the promise to pay the bearer the value of the note on demand. They were initially handwritten to a precise amount and issued on deposit or as a loan. There was a gradual move toward the issuance of fixed denomination notes, and by 1745, standardized printed notes ranging from £20 to £1,000 were being printed. Fully printed notes that did not require the name of the payee and the cashier's
signature 's signature is the most prominent on the United States Declaration of Independence and the Articles of Confederation. The name "John Hancock" or just "Hancock" has become a synonym for "signature" in the United States. A signature (; from la, s ...

signature
first appeared in 1855. The Scottish economist John Law helped establish banknotes as a formal currency in France, after the wars waged by
Louis XIV , house = Bourbon , father = Louis XIII of France , mother = Anne of Austria , birth_date = , birth_place = Château de Saint-Germain-en-Laye, Saint-Germain-en-Laye, France , death_date = , death_place = Palace of Ver ...

Louis XIV
left the country with a shortage of precious metals for coinage. In the
United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major self-governing territories, 326 India ...
there were early attempts at establishing a central bank in
1791 Events January–March * January 2 – Big Bottom massacre in the Ohio Country, marking the beginning of the Northwest Indian War. * January 12 – Holy Roman troops reenter Liège, heralding the end of the Liège Revolution, a ...

1791
and 1816, but it was only in 1862 that the
federal government of the United States The federal government of the United States (U.S. federal government) is the national government of the United States, a federal republic in North America, composed of 50 states, a federal district, five major self-governing territories and ...
began to print banknotes.


Central bank issuance of legal tender

Image:London.bankofengland.arp.jpg, The
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of the ...

Bank of England
gained a monopoly over the issue of banknotes with the Bank Charter Act of 1844. Originally, the banknote was simply a promise to the bearer that they could redeem it for its value in specie, but in 1833 the second in a series of Bank Charter Acts established that banknotes would be considered as
legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in paym ...
during peacetime. Until the mid-nineteenth century, commercial banks were able to issue their own banknotes, and notes issued by provincial
bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because b ...
ing companies were the common form of currency throughout England, outside London. The Bank Charter Act of 1844, which established the modern central bank, restricted authorisation to issue new banknotes to the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of the ...

Bank of England
, which would henceforth have sole control of the
money supply In macroeconomics, the money supply (or money stock) is the total value of money available in an economy at a point of time. There are several ways to define "money", but standard measures usually include currency in circulation and demand de ...
in 1921. At the same time, the Bank of England was restricted to issue new banknotes only if they were 100% backed by gold or up to £14 million in government debt. The Act gave the Bank of England an effective monopoly over the note issue from 1928.


Issue of banknotes

Generally, a
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ...
or treasury is solely responsible within a state or
currency union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union, whi ...

currency union
for the issue of banknotes. However, this is not always the case, and historically the paper currency of countries was often handled entirely by private banks. Thus, many different banks or institutions may have issued banknotes in a given country. Commercial banks in the United States had legally issued banknotes before there was a national currency; however, these became subject to government authorization from 1863 to 1932. In the last of these series, the issuing bank would stamp its name and promise to pay, along with the signatures of its president and cashier on a preprinted note. By this time, the notes were standardized in appearance and not too different from
Federal Reserve Note Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 a ...
s. In a small number of countries, private banknote issue continues to this day. For example, by virtue of the complex constitutional setup in the United Kingdom, certain
commercial bank A commercial bank is a financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit It can also refer to a bank, or a division of a large bank, which deals with corporat ...
s in two of the state's four constituent countries (
Scotland Scotland ( sco, Scotland, gd, Alba ) is a country that is part of the United Kingdom. Covering the northern third of the island of Great Britain, mainland Scotland has a 96-mile (154 km) border with England to the southeast and is otherwis ...
and
Northern Ireland Northern Ireland ( ga, Tuaisceart Éireann ; Ulster-Scots: ') is variously described as a country, province, or region which is part of the United Kingdom. Located in the northeast of the island of Ireland, Northern Ireland shares a border to ...

Northern Ireland
) continue to print their own banknotes for domestic circulation, even though they are not
fiat money Fiat money is a currency (a medium of exchange) established as money, often by government regulation. Fiat money does not have intrinsic value and does not have use value. It has value only because a government maintains its value, or because p ...
or declared in law as
legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in paym ...
anywhere. The UK's central bank, the
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of the ...

Bank of England
, prints notes which are legal tender in
England and Wales England and Wales () is a legal jurisdiction covering England and Wales, two of the four parts of the United Kingdom. England and Wales forms the constitutional successor to the former Kingdom of England and follows a single legal system, known as ...

England and Wales
; these notes are also usable as money (but not legal tender) in the rest of the UK (see
Banknotes of the pound sterling Sterling banknotes are the banknotes in circulation in the United Kingdom and its related territories, denominated in pounds sterling (symbol: £; ISO 4217 currency code GBP (Great Britain pound)). Sterling banknotes are official currency in th ...
). In the two Special Administrative Regions of the People's Republic of China, arrangements are similar to those in the UK; in
Hong Kong Hong Kong (, ), officially the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) (), is a metropolitan area and special administrative region of the People's Republic of China on the eastern Pearl River Delta o ...
, three commercial banks are licensed to issue Hong Kong dollar notes, and in
Macau Macau (; , ; ), also spelled Macao and officially the Macao Special Administrative Region of the People's Republic of China (Chinese: 中華人民共和國澳門特別行政區), is a city and special administrative region of the People's Republ ...
, banknotes of the
Macanese pataca The Macau pataca or Macanese pataca (; pt, pataca de Macau; sign: MOP$; code: MOP) is the currency of Macau. It is subdivided into 100 ''avos'' (; ''sin''), with 10 avos called ''ho'' () in Cantonese. The abbreviation ''MOP$'' is commonly used. ...
are issued by two different commercial banks. In
Luxembourg Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a landlocked count ...
, the
Banque Internationale à Luxembourg Banque Internationale à Luxembourg S.A. (BIL) is the oldest private bank in Luxembourg. It offers commercial and corporate banking services. The Bank provides services including investment management and private banking services, mortgage loans, ...
was entitled to issue its own
Luxembourgish franc The Luxembourg franc (''F'' or ISO ''LUF'', lb, Frang) was the currency of Luxembourg between 1854 and 1999 (except during the period 1941-'44). The franc remained in circulation until 2002, when it was replaced by the euro. During the period 1999 ...
notes until the introduction of the
Euro The euro (symbol: €; code: EUR) is the official currency of 19 of the member states of the European Union. This group of states is known as the eurozone or euro area and includes about 343 million citizens . The euro, which is divided ...
in 1999. As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002 the
Singapore dollar The Singapore dollar (sign: S$; code: SGD) is the official currency of Singapore. It is divided into 100 cents. It is normally abbreviated with the dollar sign $, or S$ to distinguish it from other dollar-denominated currencies. The Monetary ...
was issued by the Board of Commissioners of Currency Singapore, a government agency which was later taken over by the
Monetary Authority of Singapore The Monetary Authority of Singapore (Abbreviation: MAS) is the central bank and financial regulatory authority of Singapore. It administers the various statutes pertaining to money, banking, insurance, securities and the financial sector in g ...
. As with any printing, there is also a chance for banknotes to have printing errors. For U.S. banknotes, these errors can include board break errors, butterfly fold errors, cutting errors, dual denomination errors, fold over errors, and misalignment errors.


Advantages and disadvantages

Prior to the introduction of banknotes, precious or semiprecious metals minted into
coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to ...
s to certify their substance were widely used as a medium of exchange. The value that people attributed to coins was originally based upon the value of the metal unless they were token issues or had been debased. Banknotes were originally a claim for the coins held by the bank, but due to the ease with which they could be transferred and the confidence that people had in the capacity of the bank to settle the notes in coin if presented, they became a popular means of exchange in their own right. They now make up a very small proportion of the "money" that people think that they have as demand deposit bank accounts and electronic payments have negated the need to carry notes and coins. Banknotes have a natural advantage over coins in that they are lighter to carry but are also less durable. Banknotes issued by
commercial bank A commercial bank is a financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit It can also refer to a bank, or a division of a large bank, which deals with corporat ...
s had
counterparty risk A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased coll ...
, meaning that the bank may not be able to make payment when the note was presented. Notes issued by central banks had a theoretical risk when they were backed by gold and silver. Both banknotes and coins are subject to
inflation In economics, inflation (or less frequently, price inflation) is a general rise in the price level in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inf ...
. The durability of
coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to ...
s means that even if metal coins melt in a fire or are submerged under the sea for hundreds of years they still have some value when they are recovered. Gold
coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to ...
s salvaged from shipwrecks retain almost all of their original appearance, but silver
coin A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to ...
s slowly corrode. Other costs of using bearer money include: # Discounting to face value: Before national currencies and efficient clearing houses, banknotes were only redeemable at face value at the issuing bank. Even a branch bank could discount notes of other branches of the same bank. The discounts usually increased with distance from the issuing bank. The discount also depended on the perceived safety of the bank. When banks failed, the notes were usually partly redeemed out of reserves, but sometimes became worthless. The problem of discounting within a country does not exist with national currencies; however, under
floating exchange rate ''De facto'' exchange-rate arrangements in 2013 as classified by the International Monetary Fund. In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange ...
s currencies are valued relative to one another in the
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of ...
. #
Counterfeiting Office of Field Operations agent checking the authenticity of a travel document at an international airport using a stereo microscope To counterfeit means to imitate something authentic, with the intent to steal, destroy, or replace the origina ...
paper notes has always been a problem, especially since the introduction of color photocopiers and computer
image scanner An image scanner—often abbreviated to just scanner, is a device that optically scans images, printed text, handwriting or an object and converts it to a digital image. Commonly used in offices are variations of the desktop ''flatbed scanner'' wh ...

image scanner
s. Numerous banks and nations have incorporated many types of countermeasures in order to keep the money secure. However, extremely sophisticated counterfeit notes known as
superdollar A superdollar (also known as a superbill or supernote) is a very high quality counterfeit United States one hundred-dollar bill, alleged by the U.S. Government to have been made by unknown organizations or governments. In 2011, government sources st ...
s have been detected in recent years. # Manufacturing or issue costs. Coins are produced by industrial manufacturing methods that process the precious or semi-precious metals, and require additions of alloy for hardness and wear resistance. By contrast, bank notes are printed paper (or polymer), and typically have a higher cost of issue, especially in larger denominations, compared with coins of the same value. # Wear costs. Banknotes don't lose
economic value In economics, economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured relative to units of currency, and the interpretation is therefore "what is the maximum amount of money a spec ...
by wear, since, even if they are in poor condition, they are still a legally valid claim on the issuing bank. However, banks of issue do have to pay the cost of replacing banknotes in poor condition and paper notes wear out much faster than coins. # Cost of transport. Coins can be expensive to transport for high value transactions, but banknotes can be issued in large denominations that are lighter than the equivalent value in coins. # Cost of acceptance. Coins can be checked for authenticity by weighing and other forms of examination and testing. These costs can be significant, but good quality coin design and manufacturing can help reduce these costs. Banknotes also have an acceptance cost, the costs of checking the banknote's security features and confirming acceptability of the issuing bank. The different disadvantages between coins and banknotes imply that there may be an ongoing role for both forms of bearer money, each being used where its advantages outweigh its disadvantages.


Materials used for banknotes


Paper banknotes

Most banknotes are made from
cotton paper Cotton paper, also known as rag paper or rag stock paper, is made using a cotton linter or cotton from used cloth (rags) as the primary material. Important documents are often printed on cotton paper, because it is known to last many years withou ...
with a weight of 80 to 90 grams per square meter. The cotton is sometimes mixed with
linen Linen () is a textile made from the fibers of the flax plant. Linen is very strong and absorbent and dries faster than cotton. Because of these properties, linen is comfortable to wear in hot weather and is valued for use in garments. It also ...
, abaca, or other textile fibres. Generally, the paper used is different from ordinary paper: it is much more resilient, resists wear and tear (the average life of a banknote is two years), and also does not contain the usual agents that make ordinary paper glow slightly under
ultraviolet Ultraviolet (UV) is a form of electromagnetic radiation with wavelength from 10 nm (with a corresponding frequency around 30 PHz) to 400 nm (750 THz), shorter than that of visible light, but longer than X-rays. UV radiation is present in s ...
light. Unlike most printing and writing paper, banknote paper is infused with polyvinyl alcohol or gelatin, instead of water, to give it extra strength. Early Chinese banknotes were printed on paper made of
mulberry ''Morus'', a genus of flowering plants in the family Moraceae, consists of diverse species of deciduous trees commonly known as mulberries, growing wild and under cultivation in many temperate world regions. Generally, the plant has three main ...
bark. Mitsumata (''
Edgeworthia chrysantha ''Edgeworthia chrysantha'' (common names: Oriental paperbush, mitsumata) is a plant in the family Thymelaeaceae. Etymology The genus was named in honour of Michael Pakenham Edgeworth (1812–1881), an Irish-born Victorian era amateur botanist, wh ...
'') and other fibers are used in Japanese banknote paper (a kind of
Washi cranes made of ''washi''.">Crane (bird)">cranes made of ''washi''. is traditional Japanese paper. The term is used to describe paper that uses local fiber, processed by hand and made in the traditional manner. ''Washi'' is made using fibers f ...
). Most banknotes are made using the mould made process in which a
watermark A watermark is an identifying image or pattern in paper that appears as various shades of lightness/darkness when viewed by transmitted light (or when viewed by reflected light, atop a dark background), caused by thickness or density variations i ...
and thread is incorporated during the paper forming process. The thread is a simple looking security component found in most banknotes. It is however often rather complex in construction comprising fluorescent, magnetic, metallic and micro print elements. By combining it with watermarking technology the thread can be made to surface periodically on one side only. This is known as windowed thread and further increases the counterfeit resistance of the banknote paper. This process was invented by Portals, part of the
De La Rue De La Rue plc (, ) is a British company headquartered in Basingstoke, England that manufactures polymer and security printed products including banknotes and tax stamps. It also has a factory on the Team Valley Trading Estate in Gateshead, and ...
group in the UK. Other related methods include watermarking to reduce the number of corner folds by strengthening this part of the note. Varnishing and coatings reduce the accumulation of dirt on the note for longer durability in circulation. Another security feature is based on windows in the paper which are covered by to make it very hard to copy. Such technology is applied as a ''portrait window'' for the higher denominations of the Europa series (ES2) of the
euro The euro (symbol: €; code: EUR) is the official currency of 19 of the member states of the European Union. This group of states is known as the eurozone or euro area and includes about 343 million citizens . The euro, which is divided ...
banknotes. Windows are also used with the Hybrid substrate from
Giesecke+DevrientGiesecke may refer to: People: *Heinz-Eberhard Giesecke (1913–1991), German historian *Karl Ludwig Giesecke FRSE (1761–1833), German actor, librettist, polar explorer and mineralogist *Markus Giesecke (born 1979), German futsal player from Regen ...
which is composed of an inner layer of paper substrate with thin outer layers of plastic film for high durability.


History of counterfeiting and security measures

When paper bank notes were first introduced in England, they resulted in a dramatic rise in counterfeiting. The attempts by the Bank of England and the Royal Mint to stamp out currency crime led to new policing strategies, including the increased use of entrapment. The characteristics of banknotes, their materials and production techniques (as well as their development over history) are topics that normally aren't thoroughly examined by historians, even though now there are a number of works detailing how bank notes were actually constructed. This is mostly due to the fact that historians prioritize the theoretical understanding of how money worked rather than how it was produced. The first great deterrent against counterfeiting was the death penalty for forgers, but this wasn't enough to stop the rise of counterfeiting. Over the eighteenth century, far fewer banknotes were circulating in England compared to the boom of bank notes in the nineteenth century; because of this, improving note-making techniques wasn't considered a compelling issue. In the eighteenth century, banknotes were produced mainly through
copper-plate engraving 300px, Hungarian forint. Depicted area: .">Banknotes of the Hungarian forint">Hungarian forint. Depicted area: . Intaglio ( ; ) is the family of printing and printmaking techniques in which the image is incised into a surface and the incised lin ...
and
printing Printing is a process for mass reproducing text and images using a master form or template. The earliest non-paper products involving printing include cylinder seals and objects such as the Cyrus Cylinder and the Cylinders of Nabonidus. The ear ...
and they were single-sided. Notes making technologies remained basically the same during the eighteenth century The first banknotes were produced through the so-called ''
intaglio printing 300px, Hungarian forint. Depicted area: .">Banknotes of the Hungarian forint">Hungarian forint. Depicted area: . Intaglio ( ; ) is the family of printing and printmaking techniques in which the image is incised into a surface and the incised lin ...
'', a technique that consisted of engraving a copper plate by hand and then covering it in ink to print the bank notes. Only with this technique it was possible, at that time, to force the paper into the lines of the engraving and to make suitable banknotes. Another factor that made it harder to counterfeit banknotes was the paper, since the type of paper used for banknotes was rather different from the paper commercially available at that time. Despite this, some forgers managed to successfully forge notes by getting involved with and consulting paper makers, in order to make a similar kind of paper by themselves. Mockford, 2014; pp. 122-123 Furthermore, watermarked paper was also used since banknotes first appeared; it involved the sewing of a thin wire frame into paper mould. Watermarks for notes were first used in 1697 by a Berkshire paper maker whose name was Rice Watkins. Watermarks, together with a special paper type, were supposed to make it harder and more expensive to forge banknotes, since more complex and expensive paper making machines were needed in order to make them. At the beginning of the nineteenth century (the so-called Bank Restriction Period, 1797-1821), the dramatically increased demand of bank notes slowly forced the banks to refine the technologies employed. In 1801,
watermarks A watermark is an identifying image or pattern in paper that appears as various shades of lightness/darkness when viewed by transmitted light (or when viewed by reflected light, atop a dark background), caused by thickness or density variations i ...
, which previously were straight lines, became wavy, thanks to the idea of a watermark mould maker whose name was William Brewer. This made even harder the counterfeiting of bank notes, at least in the short term, since in 1803 the number of forged bank notes fell to just 3000, compared to 5000 of the previous year In the same period, bank notes also started to become double-sided and with more complex patterns, and banks asked skilled engravers and artists to help them make their notes harder to counterfeit (episode labelled by historians as "the search for the inimitable banknote"). The ease with which paper money can be created, by both legitimate authorities and counterfeiters, has led both to a temptation in times of crisis such as war or revolution to produce paper money which was not supported by precious metal or other goods, thus leading to
Hyperinflation 400px, Hyperinflation in Venezuela represented by the time it would take for money to lose 90% of its value (301-day rolling average, inverted logarithmic scale). In economics, hyperinflation is very high and typically accelerating inflatio ...
and a loss of faith in the value of paper money, e.g. the
Continental Currency 300px, Obverse and reverse of a three pence note of paper currency issued by the David_Hall_in_1764..html" style="text-decoration: none;"class="mw-redirect" title="Benjamin Franklin">Province of Pennsylvania and printed by David_Hall_in_1764.">Benjam ...
produced by the
Continental Congress The Continental Congress was a series of legislative bodies which met in the British American colonies and the newly declared United States just before, during, and after the American Revolution. The term "Continental Congress" most specifically ...
during the
American Revolution The American Revolution was an ideological and political revolution which occurred in colonial North America between 1765 and 1783. The Americans in the Thirteen Colonies defeated the British in the American Revolutionary War (1775–1783), ...
, the
Assignat An assignat () was a monetary instrument, an order to pay, used during the time of the French Revolution, and the French Revolutionary Wars. France Assignats were paper money issued by the Constituent Assembly in France from 1789 to 1796, during ...
s produced during the
French Revolution The French Revolution ( ) refers to the period that began with the Estates General of 1789 and ended in November 1799 with the formation of the French Consulate. Many of its ideas are considered fundamental principles of Western liberal de ...
, the paper currency produced by the
Confederate States of America The Confederate States of America (CSA), commonly referred to as the Confederate States or the Confederacy, was an unrecognized breakaway state in existence from February 8, 1861, to May 9, 1865, that fought against the United States of Ameri ...

Confederate States of America
and the individual states of the Confederate States of America, the financing of World War I by the
Central Powers The Central Powers, also Central Empires,german: Mittelmächte; hu, Központi hatalmak; tr, İttifak Devletleri / ; bg, Централни сили, translit=Tsentralni sili was one of the two main coalitions that fought World War I (1914–18) ...
(by 1922 1 gold
Austro-Hungarian krone The Krone or korona (german: Krone, Hungarian and Polish ''korona'', sl, krona, sh, kruna, Czech and sk, koruna, Romanian: coroană) was the official currency of the Austro-Hungarian Empire from 1892 (when it replaced the gulden, forint, florén o ...
of 1914 was worth 14,400 paper Kronen), the devaluation of the
Yugoslav Dinar The dinar (Cyrillic script: динар) was the currency of the three Yugoslav states: the Kingdom of Yugoslavia (formerly the Kingdom of Serbs, Croats and Slovenes), the Socialist Federal Republic of Yugoslavia, and the Federal Republic of Yugosl ...
in the 1990s, etc. Banknotes may also be
overprinted An overprint is an additional layer of text or graphics added to the face of a postage stamp, banknote or postal stationery after it has been printed. Post offices most often use overprints for internal administrative purposes such as accounting b ...
to reflect political changes that occur faster than new currency can be printed. In 1988,
Austria Austria (, ; german: Österreich ), officially the Republic of Austria (german: Republik Österreich, links=no, ), is a landlocked East Alpine country in the southern part of Central Europe. It is composed of nine federated states (''Bund ...
produced the 5000 Schilling banknote (
Mozart Wolfgang Amadeus Mozart (27 January 17565 December 1791), baptised as Johannes Chrysostomus Wolfgangus Theophilus Mozart, was a prolific and influential composer of the Classical period. Born in Salzburg, in the Holy Roman Empire, Mozart ...
), which is the first foil application ( Kinegram) to a paper banknote in the history of banknote printing. The application of optical features is now in common use throughout the world. Many countries' banknotes now have embedded holograms.


Polymer banknotes

In 1983,
Costa Rica Costa Rica (, ; ; literally "Rich Coast"), officially the Republic of Costa Rica ( es, República de Costa Rica), is a country in Central America, bordered by Nicaragua to the north, the Caribbean Sea to the northeast, Panama to the southeas ...
and
Haiti Haiti (; ht, Ayiti ); french: Haïti ; officially the Republic of Haiti (; ) and formerly known as Hayti, is a country located on the island of Hispaniola in the Greater Antilles archipelago of the Caribbean Sea, to the east of Cuba and Jama ...
issued the first
Tyvek Tyvek () is a brand of flashspun high-density polyethylene fibers, a synthetic material; the name is a registered trademark of the DuPont company, known for their production of chemicals and textiles. Tyvek is often used as housewrap, a synthetic ...
and the
Isle of Man ) , anthem = "O Land of Our Birth" , image = Isle of Man by Sentinel-2.jpg , image_map = Europe-Isle_of_Man.svg , mapsize = 290px , map_alt = Location of the Isle of Man in Europe , map_caption = Location of the Isle of Man (green) in Europe ...
issued the first Bradvek polymer (or plastic) banknotes; these were printed by the American Banknote Company and developed by
DuPont DuPont de Nemours, Inc., commonly known as DuPont, is an American company formed by the merger of Dow Chemical and E. I. du Pont de Nemours and Company on August 31, 2017, and the subsequent spinoffs of Dow Inc. and Corteva. Prior to the spinof ...
. These early plastic notes were plagued with issues such as ink wearing off and were discontinued. In 1988, after significant research and development in Australia by the
Commonwealth Scientific and Industrial Research Organisation The Commonwealth Scientific and Industrial Research Organisation (CSIRO) is an Australian Government agency responsible for scientific research. CSIRO works with leading organisations around the world. From its headquarters in Canberra, CSIRO ...
(CSIRO) and the
Reserve Bank of Australia The Reserve Bank of Australia (RBA) is Australia's central bank and banknote issuing authority. It has had this role since 14 January 1960, when the ''Reserve Bank Act 1959'' removed the central banking functions from the Commonwealth Bank. The ...
, Australia produced the first
polymer banknote Polymer banknotes are banknotes made from a synthetic polymer such as biaxially oriented polypropylene (BOPP). Such notes incorporate many security features not available in paper banknotes, including the use of metameric inks. Polymer banknotes las ...
made from biaxially-oriented polypropylene (plastic), and in 1996, it became the first country to have a full set of circulating polymer banknotes of all denominations completely replacing its paper banknotes. Since then, other countries to adopt circulating polymer banknotes include
Bangladesh Bangladesh (, bn, বাংলাদেশ, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the eighth-most populous country in the world, with a population exceeding 163 million people, in an area of , ma ...
, Brazil,
Brunei Brunei ( ; ), officially the Nation of Brunei, the Abode of Peace ( ms, Negara Brunei Darussalam, Jawi: ), is a country located on the north coast of the island of Borneo in Southeast Asia. Apart from its coastline with the South China Sea, t ...

Brunei
, Canada,
Chile Chile (, ; ), officially the Republic of Chile (), is a country in western South America. It occupies a long, narrow strip of land between the Andes to the east and the Pacific Ocean to the west. Chile covers an area of and has a population ...
, Guatemala,
Dominican Republic The Dominican Republic ( ; es, República Dominicana, ) is a country located on the island of Hispaniola in the Greater Antilles archipelago of the Caribbean region. It occupies the eastern five-eighths of the island, which it shares with H ...
, Indonesia,
Israel Israel (; he, יִשְׂרָאֵל; ar, إِسْرَائِيل), officially known as the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, '), is a country in Western Asia, located on the southeastern shore of the Mediterranean Se ...
, Malaysia,
Mexico Mexico ( es, México ; Nahuan languages: ), officially the United Mexican States (; EUM ), is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to ...
, Nepal, New Zealand, Papua New Guinea,
Paraguay Paraguay (; ), officially the Republic of Paraguay ( es, República del Paraguay, links=no; gn, Tetã Paraguái, links=no), is a country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, a ...
,
Romania Romania ( ; ro, România ) is a country located at the crossroads of Central, Eastern, and Southeastern Europe. It shares land borders with Bulgaria to the south, Ukraine to the north, Hungary to the west, Serbia to the southwest, and Moldov ...
,
Samoa Samoa (), officially the Independent State of Samoa ( sm, Malo Saʻoloto Tutoʻatasi o Sāmoa; sm, Sāmoa, ) and until 1997 known as Western Samoa, is a Polynesian island country consisting of two main islands (Savai'i and Upolu), two smaller, ...
, Singapore, the
Solomon Islands Solomon Islands is a sovereign state consisting of six major islands and over 900 smaller islands in Oceania, to the east of Papua New Guinea and northwest of Vanuatu. It has a land area of , and a population of 652,858. Its capital, Honiara ...
,
Thailand ) , royal_anthem = ''Sansoen Phra Barami''( en, "Glorify His prestige") , image_map = , map_caption = , capital = Bangkok , coordinates = , largest_city = Bangkok , official_languages = ThaiTrinidad and Tobago Trinidad and Tobago (, ), officially the Republic of Trinidad and Tobago, is the southernmost island country in the Caribbean and is known for its fossil-fuel wealth. Consisting of the main islands Trinidad and Tobago, and numerous much smalle ...

Trinidad and Tobago
, the United Kingdom, Vietnam, and
Zambia Zambia (), officially the Republic of Zambia (Tonga: ''Cisi ca Zambia''; Nyanja: ''Dziko la Zambia''), is a landlocked country at the crossroads of Central, Southern and East Africa. Its neighbours are the Democratic Republic of the Congo to ...
, with other countries issuing commemorative polymer notes, including China, Kuwait, the
Northern Bank Danske Bank UK (formerly Northern Bank) is a commercial bank in Northern Ireland. Northern Bank was one of the oldest banks in Ireland having been formed in 1809, and formed part of one of the Big Four banks in Ireland. Northern Bank took on the ...
of
Northern Ireland Northern Ireland ( ga, Tuaisceart Éireann ; Ulster-Scots: ') is variously described as a country, province, or region which is part of the United Kingdom. Located in the northeast of the island of Ireland, Northern Ireland shares a border to ...

Northern Ireland
, Taiwan and Hong Kong. Another country indicating plans to issue polymer banknotes is
Nigeria Nigeria (), officially the Federal Republic of Nigeria, is a country in West Africa. It borders Niger in the north, Chad in the northeast, Cameroon in the east, and Benin in the west. Its southern coast is on the Gulf of Guinea in the Atlanti ...
. In 2005,
Bulgaria Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria ( bg, Република България, links=no, Republika Bǎlgariya, ), is a country in Southeast Europe. It is bordered by Romania to the north, Serbia and No ...
issued the world's first hybrid paper-polymer banknote. Polymer banknotes were developed to improve durability and prevent
counterfeit Office of Field Operations agent checking the authenticity of a travel document at an international airport using a stereo microscope To counterfeit means to imitate something authentic, with the intent to steal, destroy, or replace the origina ...
ing through incorporated security features, such as optically variable devices that are extremely difficult to reproduce.


Other materials

Over the years, a number of materials other than paper have been used to print banknotes. This includes various textiles, including silk, and materials such as leather. Silk and other fibers have been commonly used in the manufacture of various banknote papers, intended to provide both additional durability and security. Crane and Company patented banknote paper with embedded silk threads in 1844 and has supplied paper to the United States Treasury since 1879. Banknotes printed on pure silk "paper" include "emergency money" Notgeld issues from a number of German towns in 1923 during a period of fiscal crisis and hyperinflation. Most notoriously, Bielefeld produced a number of silk, leather, velvet, linen and wood issues. These issues were produced primarily for collectors, rather than for circulation. They are in demand by collectors. Banknotes printed on cloth include a number of Communist Revolutionary issues in China from areas such as Xinjiang, or Sinkiang, in the United Islamic Republic of East Turkestan in 1933. Emergency money was also printed in 1902 on khaki shirt fabric during the Second Boer War, Boer War. Cotton fibers together with 25% linen is the material of the banknotes in the United States. Leather banknotes (or coins) were issued in a number of sieges, as well as in other times of emergency. During the Russian America, Russian administration of Alaska, banknotes were printed on Alaskan parchment scrip, sealskin. A number of 19th century issues are known in Germanic and Estonia, including the places of Dorpat, Pernau, Reval, Werro and Woiseck. In addition to the Bielefeld issues, other German leather Notgeld from 1923 is known from Borna, Leipzig, Borna, Osterwieck, Paderborn and Pößneck. Other issues from 1923 were printed on wood, which was also used in Canada in 1763–1764 during Pontiac's Rebellion, and by the Hudson's Bay Company. In 1848, in Bohemia, wooden checkerboard pieces were used as money. Even card money, playing cards were used for currency in France in the early 19th century, and in French Canada from 1685 until 1757, the Colony of Louisiana, Dutch Guiana, and in the
Isle of Man ) , anthem = "O Land of Our Birth" , image = Isle of Man by Sentinel-2.jpg , image_map = Europe-Isle_of_Man.svg , mapsize = 290px , map_alt = Location of the Isle of Man in Europe , map_caption = Location of the Isle of Man (green) in Europe ...
in the beginning of the 19th century, and again in Germany after World War I. Most recently, Bisphenol S (BPS), has been frequently used in the production of banknotes worldwide. BPS is an endocrine disruptor that is subject to human dermal absorption through handling banknotes.


Vertical orientation

Vertical currency is a type of
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money in any form when in use or circulation as a medium of exchange, especially circulating banknotes and coins. ...
in which the orientation has been changed from the conventional horizontal orientation to a vertical orientation. Dowling Duncan, a self-touted multidisciplinary design studio, conducted a study in which they determined people tend to handle and deal with money vertically rather than horizontally, especially when the currency is processed through Automated Teller Machine, ATM and other Money changer#Mechanical device, money machines. They also note how money transactions are conducted vertically not horizontally. Bermuda dollar, Bermuda, Cape Verdean escudo, Cape Verde, Israeli new shekel, Israel, Swiss franc, Switzerland, and Venezuelan bolívar, Venezuela have adopted vertically oriented currency, although Israel and Cape Verde have now reverted to horizontal orientation. Since 1979, Sri Lankan rupee, Sri Lanka has printed the reverse of its banknotes vertically. Between 1993 and 2013, Brazil has printed banknotes of 5000 and 50000 cruzeiro real, cruzeiros reais and the first Brazilian real series of banknotes has the obverse in traditional horizontal layout, while the reverse is in vertical format. The 2018 Banknotes of the Hong Kong dollar, Hong Kong dollar banknotes series too has the obverse in traditional horizontal layout, while the reverse is in vertical format. Early Chinese banknotes were also vertical, due to the direction of Chinese writing. The 2018 Canada banknote series, 2018 Canadian $10 bill featuring a portrait of Canadian civil rights pioneer Viola Desmond is presented in a vertical format. The Banknotes of Northern Ireland, Northern Irish £5 and £10 notes issued by Ulster Bank for 2019 will also be presented in this way.


Vending machines and banknotes

In the late 20th century, vending machines were designed to recognize banknotes of the smaller values long after they were designed to recognize coins distinct from slugs. This capability has become inescapable in economies where inflation has not been followed by introduction of progressively larger coin denominations (such as the United States, where several attempts to make dollar coin (United States), dollar coins popular in general circulation have largely failed). The existing infrastructure of such machines presents one of the difficulties in changing the design of these banknotes to make them less counterfeitable, that is, by adding additional features so easily discernible by people that they would immediately reject banknotes of inferior quality, for every machine in the country would have to be updated.


Destruction

A banknote is removed from circulation because of everyday wear and tear from its handling. Banknotes are passed through a banknote sorting machine for determining authenticity and fitness for circulation, or may be classified unfit for circulation if they are worn, dirty, soiled, damaged, mutilated or torn. Unfit notes are returned to the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ...
for secure online destruction by high-speed banknote sorting machines using a cross-cut shredder device similar to a paper shredder with security level P-5 (pieces smaller than 30 mm²) according to the standard DIN 66399–2. This small size decomposes a banknote into typically more than 500 tiny pieces and rules out reconstruction like a jigsaw puzzle because the shreds from many banknotes are commingled. A subsequent Briquette, briquettor compresses shredded paper material into a small cylindrical or rectangular form for the disposal (e. g. landfill or burning Before the 1990s, unfit banknotes were destroyed by incineration with a higher risk of manipulations. When a Federal Reserve Bank of the
United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major self-governing territories, 326 India ...
receives a cash deposit from a commercial bank or another financial institution, it checks the individual notes to determine whether they are fit for future circulation. About one-third of the notes that the Fed receives are unfit, and the Fed destroys them. US dollar banknotes last an average of more than five years. Contaminated banknotes are also decommissioned and removed from circulation, primarily to prevent the spread of diseases. A Canadian government report indicates: In the US, the nickname "Fed Shreds" refers to paper money which has been shredded after becoming unfit for circulation. Although these shredded banknotes are generally landfilled, they are sometimes sold or given away in small bags as souvenirs or as briquettes. Polymer banknotes may be shredded and then melted down and recycling, recycled to form plastic products like building components, plumbing fittings, or compost bins. File:Fed-Shreds of US dollar from FRB San Francisco.jpg, Fed Shreds as souvenir from the Federal Reserve Bank of San Francisco File:Shreds US Dollar Details.jpg, Shreds of unfit US dollar notes with a typical size of less than 1.5 mm x 16 mm File:Shredded US-Dollar Notes front view.jpg, Shredded and briquetted US dollar notes from the Federal Reserve Bank of New York (approx. 1000 pieces, 1 kg) File:Shredded US Dollar Notes rear view.jpg, Shredded and briquetted US dollar notes from the Federal Reserve Bank of New York (approx. 1000 pieces, 1 kg) File:Geldscheine geschreddert und zu Block verpresst P5130163.jpg, Shredded and briquetted
euro The euro (symbol: €; code: EUR) is the official currency of 19 of the member states of the European Union. This group of states is known as the eurozone or euro area and includes about 343 million citizens . The euro, which is divided ...
banknotes from the Deutsche Bundesbank, Germany (approx. 1 kg)


Intelligent Banknote Neutralisation System

Intelligent banknote neutralisation systems (IBNS) are security systems which render banknotes unusable by marking them permanently as stolen with a degradation agent. Marked (stained) banknotes cannot be brought back into circulation easily and can be linked to the crime scene. Today's most used degradation agent is a special security ink which cannot be removed from the banknote easily and not without destroying the banknote itself, but other agents also exist. Today IBNSs are used to protect banknotes in automated teller machines, retail machines, and during cash-in-transit operations.


Dynamic Intelligent Currency Encryption

Dynamic Intelligent Currency Encryption (DICE) is a security technology introduced in 2014 by United Kingdom, British company EDAQS, which devaluates banknotes remotely that are illegal or have been stolen. The technology is based on identifiable banknotes - that could be an RFID chip or a barcode - and connects to a digital security system to verify the validity of the banknote. The company claims that the banknotes are forgery, unforgeable and contribute to solve cash-related problems as well as fight crime and terrorism. In another note, the DICE benefits cover and solve almost all cash-related issues that are seen by governments to be a motivation for the progressive abolition of cash.


Confiscation and asset forfeiture

In the United States there are many laws that allow the confiscation of cash and other assets from the bearer if there is suspicion that the money came from an illegal activity. Because a significant amount of U.S. currency contains traces of cocaine and other illegal drugs, it is not uncommon for innocent people searched at airports or stopped for traffic violations to have cash in their possession sniffed by dogs for drugs and then have the cash seized because the dog smelled drugs on the money. It is then up to the owner of the money to prove where the cash came from at his own expense. Many people simply forfeit the money. In 1994, the
United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major self-governing territories, 326 India ...
Court of Appeals, Ninth Circuit, held in the case of ''UNITED STATES of America v. U.S. CURRENCY, $30,060.00'' (39 F.3d 1039 63 USLW 2351, No. 92-55919) that the widespread presence of illegal substances on paper currency in the Los Angeles area created a situation where the reaction of a drug-sniffing dog would not create probable cause for civil forfeiture.


Paper money collecting as a hobby

Banknote collecting, or notaphily, is a slowly growing area of numismatics. Although generally not as widespread as coin and stamp collecting, the hobby is slowly expanding. Prior to the 1990s, currency collecting was a relatively small adjunct to coin collecting, but currency auctions and greater public awareness of paper money have caused more interest in rare banknotes and consequently their increased value. The most valuable banknote is the Treasury Note (1890–91), $1000 bill issued in 1890 that was sold at an auction for $2,255,000.


Trades

For years, the mode of collecting banknotes was through a handful of mail order dealers who issued price lists and catalogs. In the early 1990s, it became more common for rare notes to be sold at various coin and currency shows via auction. The illustrated catalogs and "event nature" of the auction practice seemed to fuel a sharp rise in overall awareness of paper money in the numismatic community. The emergence of currency third party grading services (similar to services that grade and "slab", or encapsulate, coins) also may have increased collector and investor interest in notes. Entire advanced collections are often sold at one time, and to this day single auctions can generate millions in gross sales. Today, eBay has surpassed auctions in terms of highest volume of sales of banknotes. However, rare banknotes still sell for much less than comparable rare coins. This disparity is diminishing as paper money prices continue to rise. A few rare and historical banknotes have sold for more than a million dollars. There are many different organizations and societies around the world for the hobby, including the International Bank Note Society (IBNS), which currently assert to have around 2,000 members in 90 countries.


Novelty

The universal appeal and instant recognition of bank notes has resulted in a plethora of novelty merchandise that is designed to have the appearance of paper currency. These items cover nearly every class of product. Cloth material printed with bank note patterns is used for clothing, bed linens, curtains, upholstery and more. Acrylic paperweights and even toilet seats with bank notes embedded inside are also common. Items that resemble stacks of bank notes and can be used as a seat or ottoman are also available. Manufacturers of these items must take into consideration when creating these products whether the product could be construed as counterfeiting. Overlapping note images and/or changing the dimensions of the reproduction to be at least 50% smaller or 50% larger than the original are some ways to avoid the risk of being considered a counterfeit. But in cases where realism is the goal, other steps may be necessary. For example, in the stack of bank notes seat mentioned earlier, the decal used to create the product would be considered counterfeit. However, once the decal has been affixed to the resin stack shell and cannot be peeled off, the final product is no longer at risk of being classified as counterfeit, even though the resulting appearance is realistic.


See also


Notes and references


Bibliography

* * * * * *


External links


Counterfeit money was a major problem in the 1850s - Pantagraph
(Bloomington, Illinois newspaper) {{Authority control Banknotes, Accounting source documents Paper products Watermarking Written communication Ancient inventions