Banknote
Overview
 
A banknote is a kind of negotiable instrument
Negotiable instrument
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...

, a promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...

 made by a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

 payable to the bearer on demand, used as money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...

, and in many jurisdictions is legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

. In addition to coin
Coin
A coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....

s, banknotes make up the cash
Cash
In common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...

 or bearer forms of all modern fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...

. With the exception of non-circulating high-value or precious metal commemorative issues, coins are used for lower valued monetary units, while banknotes are used for higher values.

The banknote was first developed in China during the Tang
Tang Dynasty
The Tang Dynasty was an imperial dynasty of China preceded by the Sui Dynasty and followed by the Five Dynasties and Ten Kingdoms Period. It was founded by the Li family, who seized power during the decline and collapse of the Sui Empire...

 and Song
Song Dynasty
The Song Dynasty was a ruling dynasty in China between 960 and 1279; it succeeded the Five Dynasties and Ten Kingdoms Period, and was followed by the Yuan Dynasty. It was the first government in world history to issue banknotes or paper money, and the first Chinese government to establish a...

 dynasties, starting in the 7th century.
Encyclopedia
A banknote is a kind of negotiable instrument
Negotiable instrument
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...

, a promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...

 made by a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

 payable to the bearer on demand, used as money
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...

, and in many jurisdictions is legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

. In addition to coin
Coin
A coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....

s, banknotes make up the cash
Cash
In common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...

 or bearer forms of all modern fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...

. With the exception of non-circulating high-value or precious metal commemorative issues, coins are used for lower valued monetary units, while banknotes are used for higher values.

The banknote was first developed in China during the Tang
Tang Dynasty
The Tang Dynasty was an imperial dynasty of China preceded by the Sui Dynasty and followed by the Five Dynasties and Ten Kingdoms Period. It was founded by the Li family, who seized power during the decline and collapse of the Sui Empire...

 and Song
Song Dynasty
The Song Dynasty was a ruling dynasty in China between 960 and 1279; it succeeded the Five Dynasties and Ten Kingdoms Period, and was followed by the Yuan Dynasty. It was the first government in world history to issue banknotes or paper money, and the first Chinese government to establish a...

 dynasties, starting in the 7th century. Its roots were in merchant receipt
Receipt
A receipt is a written acknowledgment that a specified article or sum of money has been received as an exchange for goods or services. The receipt is evidence of purchase of the property or service obtained in the exchange.-Printed:...

s of deposit during the Tang Dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage
Chinese coins
Chinese coins were produced continuously for around 2,500 years by casting in moulds, rather than being struck with dies as with most western coins.-Pre-Imperial :The earliest coinage of China was described by Sima Qian, the great historian of c...

 in large commercial transactions. During the Yuan Dynasty
Yuan Dynasty
The Yuan Dynasty , or Great Yuan Empire was a ruling dynasty founded by the Mongol leader Kublai Khan, who ruled most of present-day China, all of modern Mongolia and its surrounding areas, lasting officially from 1271 to 1368. It is considered both as a division of the Mongol Empire and as an...

, banknotes were adopted by the Mongol Empire
Mongol Empire
The Mongol Empire , initially named as Greater Mongol State was a great empire during the 13th and 14th centuries...

. In Europe, the concept of banknotes was first introduced during the 14th century, with proper banknotes appearing in the 17th century.

Advantages and disadvantages

Originally, precious and semi-precious metals were made into coins and were used to negotiate and settle trades. Banknotes offer an alternative bearer form of money, but the advantages and disadvantages between the two forms of bearer money are complex and so in different circumstances the overall advantage can lie with either form.

The costs of using bearer money include:
  1. 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 lower cost of issue, especially in larger denominations, compared to coin of the same value.
  2. Wear costs. Banknotes do not lose economic value 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.
  3. 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.
  4. 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.
  5. Security. Counterfeiting
    Counterfeit money
    Counterfeit money is currency that is produced without the legal sanction of the state or government to resemble some official form of currency closely enough that it may be confused for genuine currency. Producing or using counterfeit money is a form of fraud or forgery. Counterfeiting is probably...

     paper notes is easier than forging coins, especially true given the proliferation of color photocopiers and computer image scanner
    Image scanner
    In computing, 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. Common examples found in offices are variations of the desktop scanner where the document is placed on a glass...

    s. Numerous banks and nations have incorporated many types of countermeasures in order to keep the money secure.


The different advantages and 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.

History

Paper currency was first developed in China in the Tang Dynasty
Tang Dynasty
The Tang Dynasty was an imperial dynasty of China preceded by the Sui Dynasty and followed by the Five Dynasties and Ten Kingdoms Period. It was founded by the Li family, who seized power during the decline and collapse of the Sui Empire...

 during the 7th century, and was later introduced in the Mongol Empire
Mongol Empire
The Mongol Empire , initially named as Greater Mongol State was a great empire during the 13th and 14th centuries...

, Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

, and America. Paper money originated in two forms: drafts, which are receipts for value held on account, and "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. Banknotes were seen as essentially an I.O.U.
IOU (debt)
An IOU is usually an informal document acknowledging debt. An IOU differs from a promissory note in that an IOU is not a negotiable instrument and does not specify repayment terms such as the time of repayment. IOUs usually specify the debtor, the amount owed, and sometimes the creditor...

 or promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...

: a promise to pay someone in precious metal on presentation (see representative money
Representative money
The term representative money has been used variously to mean:*a claim on a commodity, for example gold certificates or silver certificates. In this sense it may be called 'commodity-backed money'....

). With the gradual removal of precious metals from the monetary system, banknotes evolved to represent credit money
Credit money
Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services. Examples of credit money include personal IOUs, and in general any financial instrument or bank money market account certificate, which is not immediately repayable in specie, on...

, or (if backed by the credit of a government) also fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...

.

Notes or bills were often referred to in 18th century novels and were often a key part of the plot such as a "note drawn by Lord X for £100 which becomes due in 3 months' time".

Money prior to the banknote

Money is based on the coming to pre-eminence of some commodity as payment. The oldest monetary basis was for agricultural capital: cattle and grain. In Ancient Mesopotamia
Mesopotamia
Mesopotamia is a toponym for the area of the Tigris–Euphrates river system, largely corresponding to modern-day Iraq, northeastern Syria, southeastern Turkey and southwestern Iran.Widely considered to be the cradle of civilization, Bronze Age Mesopotamia included Sumer and the...

, drafts were issued against stored grain as a unit of account. A "drachma" was a weight of grain. Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

's feudal system was based on rice per year – koku
Koku
The is a Japanese unit of volume, equal to ten cubic shaku. In this definition, 3.5937 koku equal one cubic metre, i.e. 1 koku is approximately 278.3 litres. The koku was originally defined as a quantity of rice, historically defined as enough rice to feed one person for one year...

.

At the same time, legal codes enforced the payment for injury in a standardized form, usually in precious metals. The development of money then comes from the role of agricultural capital and precious metals having a privileged place in the economy.

Such drafts were used for giro
Giro
A Giro or giro transfer is a payment transfer from one bank account to another bank account and instigated by the payer, not the payee...

 systems of banking as early as Ptolemaic Egypt
Ptolemaic Egypt
Ptolemaic Egypt began when Ptolemy I Soter invaded Egypt and declared himself Pharaoh of Egypt in 305 BC and ended with the death of queen Cleopatra VII of Egypt and the Roman conquest in 30 BC. The Ptolemaic Kingdom was a powerful Hellenistic state, extending from southern Syria in the east, to...

 in the 1st century BC.

Development in China

Banknotes in the Tang Dynasty

The banknote was first developed in China in the Tang Dynasty
Tang Dynasty
The Tang Dynasty was an imperial dynasty of China preceded by the Sui Dynasty and followed by the Five Dynasties and Ten Kingdoms Period. It was founded by the Li family, who seized power during the decline and collapse of the Sui Empire...

 during the 7th century, with local issues of paper currency. Its roots were in merchant receipt
Receipt
A receipt is a written acknowledgment that a specified article or sum of money has been received as an exchange for goods or services. The receipt is evidence of purchase of the property or service obtained in the exchange.-Printed:...

s of deposit during the Tang Dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage
Chinese coins
Chinese coins were produced continuously for around 2,500 years by casting in moulds, rather than being struck with dies as with most western coins.-Pre-Imperial :The earliest coinage of China was described by Sima Qian, the great historian of c...

 in large commercial transactions.

Before the use of paper, the Chinese used coins that were circular, with a rectangular hole in the middle. Several coins could be strung together on a rope. Merchants in China, if they became rich enough, found that their strings of coins were too heavy to carry around easily. To solve this problem, coins were often left with a trustworthy person, and the merchant was given a slip of paper recording how much money he had with that person. If he showed the paper to that person he could regain his money. Eventually, the Song Dynasty paper money called "jiaozi
Jiaozi (currency)
Jiaozi is a form of banknote which appeared around 10th century in the Sichuan capital of Chengdu, China. Most numismatists generally regard it as the first paper money in history, a development of the Chinese Song Dynasty ....

" originated from these promissory notes.

Banknotes in the Song Dynasty

By 960 the Song Dynasty
Song Dynasty
The Song Dynasty was a ruling dynasty in China between 960 and 1279; it succeeded the Five Dynasties and Ten Kingdoms Period, and was followed by the Yuan Dynasty. It was the first government in world history to issue banknotes or paper money, and the first Chinese government to establish a...

, short of copper for striking coins, issued the first generally circulating notes. A note is a promise to redeem later for some other object of value, usually specie
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...

. The issue of credit notes is often for a limited duration, and at some discount to the promised amount later. The jiaozi nevertheless did not replace coins during the Song Dynasty; paper money was used alongside the coins.

The central government soon observed the economic advantages of printing paper money, issuing a monopoly right of several of the deposit shops to the issuance of these certificates of deposit. 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 officially stepped in and produced their own state-issued paper money (using woodblock printing
Woodblock printing
Woodblock 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....

).

Even before this point, the Song government was amassing large amounts of paper tribute
Tribute
A tribute is wealth, often in kind, that one party gives to another as a sign of respect or, as was often the case in historical contexts, of submission or allegiance. Various ancient states, which could be called suzerains, exacted tribute from areas they had conquered or threatened to conquer...

. It was recorded that each year before 1101 AD, the prefecture of Xinan (modern Xi-xian, Anhui
Anhui
Anhui is a province in the People's Republic of China. Located in eastern China across the basins of the Yangtze River and the Huai River, it borders Jiangsu to the east, Zhejiang to the southeast, Jiangxi to the south, Hubei to the southwest, Henan to the northwest, and Shandong for a tiny...

) alone would send 1,500,000 sheets of paper in seven different varieties to the capital at Kaifeng. In that year of 1101, the 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 court established several government-run factories in the cities of Huizhou
Huizhou
Huizhou , historically known as Waichow, is a city located in central Guangdong province of the People's Republic of China. Part of the Pearl River Delta, Huizhou borders the provincial capital of Guangzhou to the west, Shaoguan to the north, Heyuan to the northeast, Shanwei to the east, Shenzhen...

, Chengdu
Chengdu
Chengdu , formerly transliterated Chengtu, is the capital of Sichuan province in Southwest China. It holds sub-provincial administrative status...

, Hangzhou
Hangzhou
Hangzhou , formerly transliterated as Hangchow, is the capital and largest city of Zhejiang Province in Eastern China. Governed as a sub-provincial city, and as of 2010, its entire administrative division or prefecture had a registered population of 8.7 million people...

, and Anqi.

The size of the workforce employed in these paper money factories were quite large, as it was recorded in 1175 AD 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 zones of the empire, and were valid for use only in a designated and temporary limit of 3-year's time.

The geographic limitation changed between the years 1265 and 1274, when the late Southern Song government finally produced a nationwide standard currency of paper money, once its widespread circulation 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 since 1107, the government printed money in no less than six ink colors and printed notes with intricate designs and sometimes even with mixture of unique fiber in the paper to avoid counterfeiting.

Banknotes in the Mongol Empire

The successive Yuan Dynasty
Yuan Dynasty
The Yuan Dynasty , or Great Yuan Empire was a ruling dynasty founded by the Mongol leader Kublai Khan, who ruled most of present-day China, all of modern Mongolia and its surrounding areas, lasting officially from 1271 to 1368. It is considered both as a division of the Mongol Empire and as an...

 of the Mongol Empire
Mongol Empire
The Mongol Empire , initially named as Greater Mongol State was a great empire during the 13th and 14th centuries...

 was the first dynasty in China to use paper currency as the predominant circulating medium. The founder of the Yuan Dynasty, Kublai Khan
Kublai Khan
Kublai Khan , born Kublai and also known by the temple name Shizu , was the fifth Great Khan of the Mongol Empire from 1260 to 1294 and the founder of the Yuan Dynasty in China...

, issued paper money known as Chao
Chao (currency)
The Chao , was the official banknote of the Yuan Dynasty in China. Unlike the earlier paper money such as Jiaozi, it was the first paper currency to be used as the predominant circulating medium in the history of China....

 in his reign. The original notes during the Yuan Dynasty were restricted in area and duration as in the Song Dynasty, but in the later course of the dynasty, facing massive shortages of specie to fund their ruling in China, began printing paper money without restrictions on duration.

The Venetian merchants were impressed by the fact that the Chinese paper money was guaranteed by the State and not by the private merchant or private banker as they did in the West.

Banknotes in Europe

The term comes from the notes of the bank ("nota di banco"), and dates from fourteenth 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 (a currency account). In the fourteenth century, it was used in every part of Europe, and in Italian city-state merchants colonies outside of Europe. For international payments, the more efficient and sophisticated bill of exchange ("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.

In medieval
Middle Ages
The Middle Ages is a periodization of European history from the 5th century to the 15th century. The Middle Ages follows the fall of the Western Roman Empire in 476 and precedes the Early Modern Era. It is the middle period of a three-period division of Western history: Classic, Medieval and Modern...

 Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

 and Flanders
Count of Flanders
The Count of Flanders was the ruler or sub-ruler of the county of Flanders from the 9th century until the abolition of the position by the French revolutionaries in 1790....

, because of the insecurity and impracticality of transporting large sums of money over long distances, money traders started using promissory note
Promissory note
A promissory note is a negotiable instrument, wherein one party makes an unconditional promise in writing to pay a determinate sum of money to the other , either at a fixed or determinable future time or on demand of the payee, under specific terms.Referred to as a note payable in accounting, or...

s. In the beginning these were personally registered, but they soon became a written order to pay the amount to whoever had it in their possession. These notes can be seen as a predecessor to regular banknotes.

The first European banknotes were issued by Stockholms Banco
Stockholms Banco
Stockholms Banco in Sweden was the first European bank to print banknotes. The bank was founded in 1657 by Johan Palmstruch and began printing banknotes in 1661...

, a predecessor of the Bank of Sweden, in 1660, although the bank ran out of coins to redeem its notes in 1664 and ceased operating in that year.

In 1696, Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...

 achieved something unique. It became the first commercial bank in Europe to successfully issue paper currency. After more than 300 years, it continues to do so. This makes its banknotes the longest continuous issue in the world. Where Bank of Scotland led, others followed. Since 1696, more than 80 different Scottish banks have placed their notes into circulation. Together they have played a vital role in Scotland's economic and commercial development.

Until Louis XIV, French banknotes were issued by small creditors, had limited circulation, and were not backed by the authority of the state. The Scottish economist John Law
John Law (economist)
John Law was a Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself and that national wealth depended on trade...

 helped establish banknotes as formal currency, backed by capital consisting of French government bills and government-accepted notes.

Banknotes in the United States

In the early 1690s, the Massachusetts Bay Colony
Massachusetts Bay Colony
The Massachusetts Bay Colony was an English settlement on the east coast of North America in the 17th century, in New England, situated around the present-day cities of Salem and Boston. The territory administered by the colony included much of present-day central New England, including portions...

 was the first of the Thirteen Colonies
Thirteen Colonies
The Thirteen Colonies were English and later British colonies established on the Atlantic coast of North America between 1607 and 1733. They declared their independence in the American Revolution and formed the United States of America...

 to issue permanently circulating banknotes. The use of fixed denominations and printed banknotes came into use in the 18th century.

The Confederate Congress met in Montgomery, Alabama on March 9, 1861 and authorized the issuing of paper currency (in the form of interest-bearing notes). Such notes were originally printed by the National Bank Note Co.

In the early 18th century each of the thirteen colonies issued their own banknotes. During the American Revolutionary War
American Revolutionary War
The American Revolutionary War , the American War of Independence, or simply the Revolutionary War, began as a war between the Kingdom of Great Britain and thirteen British colonies in North America, and ended in a global war between several European great powers.The war was the result of the...

, the Continental Congress
Continental Congress
The Continental Congress was a convention of delegates called together from the Thirteen Colonies that became the governing body of the United States during the American Revolution....

 issued Continental currency to finance the war. The federal government of the United States
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...

 did not print banknotes until 1862. However, almost immediately after adoption of the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...

 in 1789, the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 chartered the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...

 and authorized it to issue banknotes. The bank served as quasi-central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

 of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

. The bank closed in 1811 when Congress failed to renew its charter. In 1816, Congress chartered the Second Bank of the United States
Second Bank of the United States
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...

. When its charter expired in 1836, the bank continued to operate under a charter granted by the Commonwealth of Pennsylvania until 1841.

In the United States, public acceptance of banknotes in replacement of precious metals was hastened in part by Executive Order 6102
Executive Order 6102
Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States"...

 in 1933. This order carried the threat of a maximum $10,000 fine and a maximum of ten years in prison for anyone who kept more than $100 of gold in preference to banknotes.

Issue of banknotes

Generally, a central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

 or treasury is solely responsible within a state or currency union
Currency union
A currency union is where two or more states share the same currency, though without there necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.There are three types of currency unions:#Informal - unilateral...

 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. In the United States, commercial banks were authorized to issue banknotes from 1863 to 1935. 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 the Federal Reserve Notes that circulated for most of the 20th century.

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
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, certain commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...

s in two of the union's four constituent countries (Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...

 and Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

) continue to print their own banknotes for domestic circulation, even though they are not fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...

 or declared in law as legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

 anywhere. The UK's central bank, the Bank of England
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, it is the second oldest central bank in the world...

, prints notes which are legal tender in England and Wales
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...

; these notes are also usable as money (but not legal tender) in the rest of the UK (see Banknotes of the pound sterling).

In Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...

, three commercial banks are licenced to issue Hong Kong dollar notes. As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002 the Singapore dollar
Singapore dollar
The Singapore dollar or Dollar is the official currency of Singapore. It is normally abbreviated with the dollar sign $, or alternatively S$ to distinguish it from other dollar-denominated currencies...

 was issued by the Board of Commissioners of Currency Singapore, a government agency which was later taken over by the Monetary Authority of Singapore
Monetary Authority of Singapore
The Monetary Authority of Singapore is Singapore's central bank and financial regulatory authority...

.

Materials used for banknotes

Paper banknotes

Most banknotes are made from cotton paper
Cotton paper
Cotton paper is made from cotton linters or cotton from used cloths were the primary material source, hence the name rag paper. Cotton paper is superior in both strength and durability to wood pulp-based paper, which may contain high concentrations of acids.-Properties:Certain cotton fibre paper...

 (see also paper
Paper
Paper is a thin material mainly used for writing upon, printing upon, drawing or for packaging. It is produced by pressing together moist fibers, typically cellulose pulp derived from wood, rags or grasses, and drying them into flexible sheets....

) with a weight of 80 to 90 grams per square meter. The cotton is sometimes mixed with linen
Linen
Linen is a textile made from the fibers of the flax plant, Linum usitatissimum. Linen is labor-intensive to manufacture, but when it is made into garments, it is valued for its exceptional coolness and freshness in hot weather....

, abaca
Abacá
Abacá, Musa textilis is a species of banana native to the Philippines, grown as a commercial crop in the Philippines, Ecuador, and Costa Rica. The plant is of great economic importance, being harvested for its fibre, once generally called Manila hemp, extracted from the trunk or pseudostem. On...

, 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
Ultraviolet light is electromagnetic radiation with a wavelength shorter than that of visible light, but longer than X-rays, in the range 10 nm to 400 nm, and energies from 3 eV to 124 eV...

 light. Unlike most printing and writing paper, banknote paper is infused with polyvinyl alcohol or gelatin to give it extra strength. Early Chinese banknotes were printed on paper made of mulberry
Mulberry
Morus is a genus of flowering plants in the family Moraceae. The 10–16 species of deciduous trees it contains are commonly known as Mulberries....

 bark and this fiber is used in Japanese banknote paper today.

Most banknotes are made using the mould made process in which a watermark
Watermark
A watermark is a recognizable image or pattern in paper that appears as various shades of lightness/darkness when viewed by transmitted light , caused by thickness or density variations in the paper...

 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
De La Rue plc is a British security printing, papermaking and cash handling systems company headquartered in Basingstoke, Hampshire. It also has a factory on the Team Valley Trading Estate, Gateshead, and other facilities at Loughton, Essex and Bathford, Somerset...

 group in the UK. Other related methods include watermarking to reduce the number of corner folds by strengthening this part of the note, coatings to reduce the accumulation of dirt on the note, and plastic windows in the paper that make it very hard to copy.

Counterfeiting and security measures on paper banknotes

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 and a loss of faith in the value of paper money, e.g. the Continental Currency produced by the Continental Congress
Continental Congress
The Continental Congress was a convention of delegates called together from the Thirteen Colonies that became the governing body of the United States during the American Revolution....

 during the American Revolution
American Revolution
The American Revolution was the political upheaval during the last half of the 18th century in which thirteen colonies in North America joined together to break free from the British Empire, combining to become the United States of America...

, the Assignat
Assignat
Assignat was the type of a monetary instrument used during the time of the French Revolution, and the French Revolutionary Wars.- France :...

s produced during the French Revolution
French Revolution
The French Revolution , sometimes distinguished as the 'Great French Revolution' , was a period of radical social and political upheaval in France and Europe. The absolute monarchy that had ruled France for centuries collapsed in three years...

, the paper currency produced by the Confederate States of America
Confederate States of America
The Confederate States of America was a government set up from 1861 to 1865 by 11 Southern slave states of the United States of America that had declared their secession from the U.S...

 and the Individual States of the Confederate States of America
Southern States Confederate Currency
The individual Confederate States of America issued many denominations of banknotes during the American Civil War. These notes supplemented the "federal" issues from the Confederate States of America, and the bank notes that were in wide circulation at the time....

, the financing of World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

 by the Central Powers
Central Powers
The Central Powers were one of the two warring factions in World War I , composed of the German Empire, the Austro-Hungarian Empire, the Ottoman Empire, and the Kingdom of Bulgaria...

 (by 1922 1 gold Austro-Hungarian krone
Austro-Hungarian krone
The Krone or korona was the official currency of the Austro-Hungarian Empire from 1892 until the dissolution of the empire in 1918...

 of 1914 was worth 14,400 paper Kronen), the devaluation of the Yugoslav Dinar
Yugoslav dinar
The dinar was the currency of the three Yugoslav states: the Kingdom of Yugoslavia , the Socialist Federal Republic of Yugoslavia and the Federal Republic of Yugoslavia between 1918 and 2003. The dinar was subdivided into 100 para...

 in the 1990s, etc. Banknotes may also be overprinted to reflect political changes that occur faster than new currency can be printed.

In 1988, Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...

 produced the 5000 Schilling banknote (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
Costa Rica , officially the Republic of Costa Rica is a multilingual, multiethnic and multicultural country in Central America, bordered by Nicaragua to the north, Panama to the southeast, the Pacific Ocean to the west and the Caribbean Sea to the east....

 and Haiti
Haiti
Haiti , officially the Republic of Haiti , is a Caribbean country. It occupies the western, smaller portion of the island of Hispaniola, in the Greater Antillean archipelago, which it shares with the Dominican Republic. Ayiti was the indigenous Taíno or Amerindian name for the island...

 issued the first Tyvek
Tyvek
Tyvek is a brand of flashspun high-density polyethylene fibers, a synthetic material; the name is a registered trademark of DuPont. The material is very strong; it is difficult to tear but can easily be cut with scissors or a knife...

 and the Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

 issued the first Bradvek
Bradvek
Bradvek was a form of Tyvek polymer, produced by Du Pont. It was used for printing one of the first polymer banknotes in 1983 for the Isle of Man by the American Banknote Company....

 polymer (or plastic) banknotes; these were printed by the American Banknote Company and developed by DuPont
DuPont
E. I. du Pont de Nemours and Company , commonly referred to as DuPont, is an American chemical company that was founded in July 1802 as a gunpowder mill by Eleuthère Irénée du Pont. DuPont was the world's third largest chemical company based on market capitalization and ninth based on revenue in 2009...

. In 1988, after significant research and development by the Commonwealth Scientific and Industrial Research Organisation
Commonwealth Scientific and Industrial Research Organisation
The Commonwealth Scientific and Industrial Research Organisation is the national government body for scientific research in Australia...

 (CSIRO) and the Reserve Bank of Australia
Reserve Bank of Australia
The Reserve Bank of Australia came into being on 14 January 1960 as Australia's central bank and banknote issuing authority, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank to it....

, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

 produced the first polymer banknote
Polymer banknote
Polymer banknotes were developed by the Reserve Bank of Australia , Commonwealth Scientific and Industrial Research Organisation and The University of Melbourne and were first issued as currency in Australia in 1988. These banknotes are made from the polymer biaxially-oriented polypropylene ...

 made from biaxially-oriented polypropylene (plastic), and in 1996 became the first country to have a full set of circulating polymer banknotes of all denominations. Since then, other countries to adopt circulating polymer banknotes include Bangladesh
Bangladesh
Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south...

, Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

, Brunei
Brunei
Brunei , officially the State of Brunei Darussalam or the Nation of Brunei, the Abode of Peace , is a sovereign state located on the north coast of the island of Borneo, in Southeast Asia...

, Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...

, Guatemala
Guatemala
Guatemala is a country in Central America bordered by Mexico to the north and west, the Pacific Ocean to the southwest, Belize to the northeast, the Caribbean to the east, and Honduras and El Salvador to the southeast...

, Dominican Republic
Dominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...

, Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...

, Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...

, Malaysia, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...

, Nepal
Nepal
Nepal , officially the Federal Democratic Republic of Nepal, is a landlocked sovereign state located in South Asia. It is located in the Himalayas and bordered to the north by the People's Republic of China, and to the south, east, and west by the Republic of India...

, New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...

, Papua New Guinea
Papua New Guinea
Papua New Guinea , officially the Independent State of Papua New Guinea, is a country in Oceania, occupying the eastern half of the island of New Guinea and numerous offshore islands...

, Romania
Romania
Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...

, Samoa
Samoa
Samoa , officially the Independent State of Samoa, formerly known as Western Samoa is a country encompassing the western part of the Samoan Islands in the South Pacific Ocean. It became independent from New Zealand in 1962. The two main islands of Samoa are Upolu and one of the biggest islands in...

, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...

, the Solomon Islands
Solomon Islands
Solomon Islands is a sovereign state in Oceania, east of Papua New Guinea, consisting of nearly one thousand islands. It covers a land mass of . The capital, Honiara, is located on the island of Guadalcanal...

, Sri Lanka
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...

, Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...

, Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...

, and Zambia
Zambia
Zambia , officially the Republic of Zambia, is a landlocked country in Southern Africa. The neighbouring countries are the Democratic Republic of the Congo to the north, Tanzania to the north-east, Malawi to the east, Mozambique, Zimbabwe, Botswana and Namibia to the south, and Angola to the west....

, with other countries issuing commemorative polymer notes, including China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

, Kuwait
Kuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...

, the Northern Bank
Northern Bank
Northern Bank , is a commercial bank in Northern Ireland. It is one of the oldest banks in Ireland having been formed in 1809. Northern Bank is considered one of the leading retail banks in Northern Ireland with 82 branches and four finance centres...

 of Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

, Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...

 and Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...

. Other countries indicating plans to issue polymer banknotes include Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...

 and Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

. In 2005, Bulgaria
Bulgaria
Bulgaria , officially the Republic of Bulgaria , is a parliamentary democracy within a unitary constitutional republic in Southeast Europe. The country borders Romania to the north, Serbia and Macedonia to the west, Greece and Turkey to the south, as well as the Black Sea to the east...

 issued the world's first hybrid paper-polymer banknote.

Polymer banknotes were developed to improve durability and prevent counterfeit
Counterfeit
To counterfeit means to illegally imitate something. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product...

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
Silk
Silk is a natural protein fiber, some forms of which can be woven into textiles. The best-known type of silk is obtained from the cocoons of the larvae of the mulberry silkworm Bombyx mori reared in captivity...

, and materials such as leather
Leather
Leather is a durable and flexible material created via the tanning of putrescible animal rawhide and skin, primarily cattlehide. It can be produced through different manufacturing processes, ranging from cottage industry to heavy industry.-Forms:...

.

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
Notgeld
Notgeld is the name of money issued by an institution not authorized for money emission. This occurs usually when money is not available from the central bank. The most well know emergency money emissions occurred in Germany and Austria-Hungary around the end of the first World War, that's why the...

 issues from a number of German towns in 1923 during a period of fiscal crisis and hyperinflation
Hyperinflation
In economics, hyperinflation is inflation that is very high or out of control. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases...

. Most notoriously, Bielefeld
Bielefeld
Bielefeld is an independent city in the Ostwestfalen-Lippe Region in the north-east of North Rhine-Westphalia, Germany. With a population of 323,000, it is also the most populous city in the Regierungsbezirk Detmold...

 produced a number of silk, leather, velvet, linen and wood issues, and although 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
Xinjiang
Xinjiang is an autonomous region of the People's Republic of China. It is the largest Chinese administrative division and spans over 1.6 million km2...

, or Sinkiang, in the United Islamic Republic of East Turkestan
Turkestan
Turkestan, spelled also as Turkistan, literally means "Land of the Turks".The term Turkestan is of Persian origin and has never been in use to denote a single nation. It was first used by Persian geographers to describe the place of Turkish peoples...

 in 1933. Emergency money was also printed in 1902 on khaki
Khaki
This article is about the fabric. For the color, see Khaki . Kaki, another name for the persimmon, is often misspelled "Khaki".Khaki is a type of fabric or the color of such fabric...

 shirt fabric during the Boer War
Second Boer War
The Second Boer War was fought from 11 October 1899 until 31 May 1902 between the British Empire and the Afrikaans-speaking Dutch settlers of two independent Boer republics, the South African Republic and the Orange Free State...

.

Leather banknotes (or coins) were issued in a number of siege
Siege
A siege is a military blockade of a city or fortress with the intent of conquering by attrition or assault. The term derives from sedere, Latin for "to sit". Generally speaking, siege warfare is a form of constant, low intensity conflict characterized by one party holding a strong, static...

s, as well as in other times of emergency. During the Russian administration of Alaska
Alaska
Alaska is the largest state in the United States by area. It is situated in the northwest extremity of the North American continent, with Canada to the east, the Arctic Ocean to the north, and the Pacific Ocean to the west and south, with Russia further west across the Bering Strait...

, banknotes were printed on sealskin. A number of 19th century issues are known in Germanic and Baltic states, including the towns of Dorpat, Pernau, Reval, Werro and Woisek. In addition to the Bielefeld issues, other German leather Notgeld
Notgeld
Notgeld is the name of money issued by an institution not authorized for money emission. This occurs usually when money is not available from the central bank. The most well know emergency money emissions occurred in Germany and Austria-Hungary around the end of the first World War, that's why the...

 from 1923 is known from Borna
Borna
Borna is a town in the Free State of Saxony, Germany, capital of the Leipzig district. It is situated approx. 30 km southeast of Leipzig. It has approx. 21,000 inhabitants.-History:Borna as a town is more than 750 years old....

, Osterwieck, Paderborn and Pößneck.

Other issues from 1923 were printed on wood, which was also used in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 in 1763-1764 during Pontiac's Rebellion
Pontiac's Rebellion
Pontiac's War, Pontiac's Conspiracy, or Pontiac's Rebellion was a war that was launched in 1763 by a loose confederation of elements of Native American tribes primarily from the Great Lakes region, the Illinois Country, and Ohio Country who were dissatisfied with British postwar policies in the...

, and by the Hudson's Bay Company
Hudson's Bay Company
The Hudson's Bay Company , abbreviated HBC, or "The Bay" is the oldest commercial corporation in North America and one of the oldest in the world. A fur trading business for much of its existence, today Hudson's Bay Company owns and operates retail stores throughout Canada...

. In 1848, in Bohemia
Bohemia
Bohemia is a historical region in central Europe, occupying the western two-thirds of the traditional Czech Lands. It is located in the contemporary Czech Republic with its capital in Prague...

, wooden checkerboard pieces were used as money.

Even playing cards were used for currency in France in the early 19th century, and in French Canada from 1685 until 1757, in the Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

 in the beginning of the 19th century, and again in Germany after World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...

.

Vending machines and banknotes

People are not the only economic actors who are required to accept banknotes. In the late 20th century 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
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 has not been followed by introduction of progressively larger coin denominations (such as the United States, where several attempts to introduce dollar coins 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

Banknotes last on an average of three years until it is no longer fit for circulation, after which they are collected for destruction, usually recycling or shredding. A banknote is removed from the money supply by banks or other financial institutions because of everyday wear and tear
Wear and tear
Wear and tear is damage that naturally and inevitably occurs as a result of normal wear or aging. It is used in a legal context for such areas as warranty contracts from manufacturers, which usually stipulate that damage due to wear and tear will not be covered.Wear and tear is a form of...

 from its handling. Banknote bundles are passed through a sorting machine that determines whether a particular note needs to be shredded, or are removed from the supply chain by a human inspector if they are deemed unfit for continued use – for example, if they are mutilated or torn. Counterfeit banknotes are destroyed unless they are needed for evidentiary or forensic purposes.

Contaminated banknotes are also decommissioned. A Canadian government report indicates:
These are removed from circulation primarily to prevent the spread of diseases.

When taken out of circulation, Australian bank notes are melted down and mixed together to form plastic garbage bins.

Intelligent Banknote Neutralisation System (IBNS)

Intelligent Banknote Neutralisation System
Intelligent banknote neutralisation system
Intelligent Banknote Neutralisation System is a security system which protects valuables against unauthorised access to its contents by rendering it unusable by marking all the cash as stolen by a degradation agent when an attempted attack on the system is detected.Well neutralised banknotes...

 (IBNS) is a security system which is rendering 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 IBNS are used to protect banknotes in ATM
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...

's, Retail Machines and during cash-in-transit
Cash-in-transit
Cash-in-transit or Cash/valuables-in-transit are terms used to refer to the physical transfer of banknotes, coins and items of value from one location to another....

 operations.

Paper money collecting as a hobby

Banknote collecting, or Notaphily
Notaphily
Notaphily is the study of paper money or banknotes. A notaphilist is a collector of banknotes, paper money, paper currency or plastic notes.-History:It is believed that people have been collecting paper money for as long as it has been in use...

, is a rapidly growing area of numismatics
Numismatics
Numismatics is the study or collection of currency, including coins, tokens, paper money, and related objects. While numismatists are often characterized as students or collectors of coins, the discipline also includes the broader study of money and other payment media used to resolve debts and the...

. Although generally not as widespread as coin and stamp collecting
Stamp collecting
Stamp collecting is the collecting of postage stamps and related objects. It is one of the world's most popular hobbies, with the number of collectors in the United States alone estimated to be over 20 million.- Collecting :...

, the hobby is increasingly expanding. Prior to the 1990s, currency collecting was a relatively small adjunct to coin collecting, but the practice of currency auctions, combined with larger public awareness of paper money have caused a boom in interest and values of rare banknotes.

Sanjay Relan, of Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...

 is holding the Guinness world record since 2007 for collecting 221 banknotes representing 221 different countries. He also held the Guinness world record in 2007 for a short period for collecting 235 coins representing 235 different countries.

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. Entire advanced collections are often sold at one time, and to this day single auctions can generate millions in gross sales. Today, eBay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...

 has surpassed auctions in terms of highest volume of sales of banknotes although the risk of counterfeit is extremely high. However, rare banknotes still sell for much less than comparable rare coins. This disparity is diminishing as paper money prices continue to rise. Many 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 has over 1800 member in more than 100 countries.

See also

  • Banking
  • Banknote counter
    Banknote counter
    A banknote counter is a device designed primarily to accurately count a quantity of banknotes. Additionally, a banknote counter may sort banknotes into batches and check for damaged or counterfeit notes.- History :...

  • Colnect
    Colnect
    Colnect Collectors Club Community, is a website containing wiki-like collectables catalogs. It allows collectors to manage their personal collection using these catalogs and automatically match their swap/wish-lists with those of other collectors....

  • Contaminated currency
    Contaminated currency
    An urban legend that states most U.S. banknotes have traces of cocaine on them, and is in fact accurate. In 1994, the U.S. 9th Circuit Court of Appeals determined that in Los Angeles, out of every four banknotes, on average more than three are tainted by cocaine or another illicit...

     
  • Counterfeit
    Counterfeit
    To counterfeit means to illegally imitate something. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product...

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  • Federal Reserve Note
    Federal Reserve Note
    A Federal Reserve Note is a type of banknote used in the United States of America. Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing on paper made by Crane & Co. of Dalton, Massachusetts. They are the only type of U.S...

  • Giesecke & Devrient
    Giesecke & Devrient
    Giesecke & Devrient is a German company headquartered in Munich that provides banknote and securities printing, smart cards, and cash handling systems....

  • Hell bank note

  • List of motifs on banknotes
  • List of people on banknotes
  • Money circulation
    Money circulation
    Banknotes have a limited lifetime, after which they are collected for destruction, usually recycling or shredding. A banknote is removed from the money supply by banks or other financial institutions due to everyday wear and tear from its handling...

  • Polymer banknotes
  • Postal currency
    Postal currency
    Postal Currency, or Postage Currency, was a form of US Post Office paper money printed in 5¢, 10¢, 25¢, and 50¢ denominations and issued from August 21, 1862 through May 27, 1863...

  • Seigniorage
    Seigniorage
    Seigniorage can have the following two meanings:* Seigniorage derived from specie—metal coins, is a tax, added to the total price of a coin , that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.* Seigniorage derived from notes is more...

  • Trevett v. Weeden
    Trevett v. Weeden
    Trevett v. Weeden was a Rhode Island Supreme Court decision finding state legislation regarding paper currency was violative of the state constitution. The decision set precedent for Marbury v...

  • United States Note
    United States Note
    A United States Note, also known as a Legal Tender Note, is a type of paper money that was issued from 1862 to 1971 in the U.S. Having been current for over 100 years, they were issued for longer than any other form of U.S. paper money. They were known popularly as "greenbacks" in their heyday, a...

  • Used notes


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