A currency[a] is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.[1][2] A more general definition is that a currency is a system of money in common use within a specific environment over time, especially for people in a nation state.[3] Under this definition, the British Pound sterling (£), euros (€), Japanese yen (¥), and U.S. dollars (US$) are examples of (government-issued) fiat currencies. Currencies may act as stores of value and be traded between nations in foreign exchange markets, which determine the relative values of the different currencies.[4] Currencies in this sense are either chosen by users or decreed by governments, and each type has limited boundaries of acceptance; i.e., legal tender laws may require a particular unit of account for payments to government agencies.
Other definitions of the term currency appear in the respective synonymous articles: banknote, coin, and money. This article uses the definition which focuses on the currency systems of countries.
One can classify currencies into three monetary systems: fiat money, commodity money, and representative money, depending on what guarantees a currency's value (the economy at large vs. the government's precious metal reserves). Some currencies function as legal tender in certain jurisdictions, or for specific purposes, such as payment to a government (taxes), or government agencies (fees, fines). Others simply get traded for their economic value.
The concept of a digital currency has arisen in recent years. Whether government-backed digital notes and coins (such as the digital renminbi in China, for example) will be successfully developed and implemented remains unknown.[5] Digital currencies that are not issued by a government monetary authority, such as cryptocurrencies like Bitcoin, are different because their value is market-dependent and has no safety net. Various countries have expressed concern about the opportunities that cryptocurrencies create for illegal activities such as scams, ransomware (extortion), money laundering and terrorism.[6] In 2014, the United States IRS advised that virtual currency is treated as property for federal income-tax purposes, and it provides examples of how long-standing tax principles applicable to transactions involving property apply to virtual currency.[7]
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^"Currency". The Free Dictionary. currency [...] 1. Money in any form when in actual use as a medium of exchange, especially circulating paper money.
^Bernstein, Peter (2008) [1965]. "4–5". A Primer on Money, Banking and Gold (3rd ed.). Hoboken, NJ: Wiley. ISBN 978-0-470-28758-3. OCLC 233484849.
^"Currency". Investopedia.
^"Guide to the Financial Markets" (PDF). The Economist. p. 14. Determining the relative values of different currencies is the role of the foreign-exchange markets.
^"Electronic finance: a new perspective and challenges" (PDF). Bank for International Settlements. November 2001. Archived (PDF) from the original on October 9, 2022. Retrieved May 11, 2020.
^"Regulation of Cryptocurrency Around the World". Library of Congress. August 16, 2019. p. 1. One of the most common actions identified across the surveyed jurisdictions is government-issued notices about the pitfalls of investing in the cryptocurrency markets. [...] Many of the warnings issued by various countries also note the opportunities that cryptocurrencies create for illegal activities, such as money laundering and terrorism.
^
"Frequently Asked Questions on Virtual Currency Transactions". December 31, 2019.
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