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 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 digital notes and coins will be successfully developed remains dubious.[5] Decentralized digital currencies, such as cryptocurrencies are different as they are not issued by a government monetary authority. Many warnings issued by various countries note the opportunities that cryptocurrencies create for illegal activities, such as 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 providing examples of how longstanding tax principles applicable to transactions involving property apply to virtual currency.[7]

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  1. ^ "Currency". The Free Dictionary. currency [...] 1. Money in any form when in actual use as a medium of exchange, especially circulating paper money.
  2. ^ 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.
  3. ^ "Currency". Investopedia.
  4. ^ "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.
  5. ^ "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.
  6. ^ "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.
  7. ^ "Frequently Asked Questions on Virtual Currency Transactions". December 31, 2019.

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