Generally accepted medium of exchange for goods or services / From Wikipedia, the free encyclopedia

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A currency[lower-alpha 1] 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 physical 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.

Digital currency has arisen with the popularity of computers and the Internet. Whether government-backed digital notes and coins (such as the digital renminbi in China, for example) will be successfully developed and utilized remains dubious.[5] Decentralized digital currencies, such as cryptocurrencies, are different because they are not issued by a government monetary authority; specifically, bitcoin, the first cryptocurrency and leader in terms of market capitalization, has a fixed supply and is therefore ostensibly deflationary. Many warnings issued by various countries note the opportunities that cryptocurrencies create for illegal activities such as scams, ransomware, money laundering and terrorism.[6] In 2014, the United States IRS issued a statement explaining that virtual currency is treated as property for Federal income-tax purposes, and it provide examples of how long-standing tax principles applicable to transactions involving property apply to virtual currency.[7]