View source for Bank notes

{{short description|Form of physical currency made of paper, cotton or polymer}}
{{Use dmy dates|date=March 2012}}
[[File:Billets de 5000.jpg|thumb|Banknotes with a face value of 5000 in different currencies.]]
[[File:CHF Banknotes.jpg|thumb|The current [[banknotes of the Swiss franc]] series possess at least eighteen security features.<ref>{{cite web |url=http://www.snb.ch/en/iabout/cash/current/id/cash_security |title=An overview of the security features |archive-url=https://web.archive.org/web/20131012050749/http://www.snb.ch/en/iabout/cash/current/id/cash_security |archive-date=12 October 2013 |publisher=[[Swiss National Bank]] |access-date=11 October 2013}}</ref>]]
{{Numismatics}}
{{Securities}}

A '''banknote''' (often known as a '''bill''', '''paper money''', or simply a '''note''') is a type of [[negotiable instrument|negotiable]] [[promissory note]], made by a [[bank]], 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value in the market served by the issuing bank.{{sfnp|Atack|Passell|1994|p=469}} Commercial banknotes have primarily been replaced by national banknotes issued by [[central bank]]s.

National banknotes are generally [[legal tender]], meaning that medium of [[payment]] is allowed by law or recognized by a [[legal system]] to be valid for meeting a [[financial]] obligation.<ref>{{cite web
 |url          = http://www.royalmint.com/Corporate/policies/legal_tender_guidelines.aspx
 |title        = Legal Tender Guidelines
 |date         = 
 |accessdate   = 2007-09-02
 |language     = 
 |publisher    = British Royal Mint
 |archive-url  = https://web.archive.org/web/20081217182521/http://www.royalmint.com/corporate/policies/legal_tender_guidelines.aspx
 |archive-date = 17 December 2008
 |dead-url     = yes
 |df           = dmy-all
}}</ref> Historically, banks sought to ensure that they could always pay customers in [[coin]]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]]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 money|fiat]]. With the exception of non-circulating high-value or precious metal issues, [[coin]]s are used for lower valued monetary units, while banknotes are used for higher values.

In China during the [[Han Dynasty]] [[promissory note]]s appeared in 118 BC and were made of leather.<ref>{{cite web|url=https://www.pbs.org/wgbh/nova/ancient/history-money.html|title=NOVA - The History of Money|work=pbs.org}}</ref>Rome may use a durable lightweight substance as promissory notes in 57 AD which have been found in London.<ref>{{Cite news|url=https://news.nationalgeographic.com/2016/05/ancient-rome-London-Londinum-Bloomberg-archaeology-Boudicca-archaeology/|title=Ancient Roman IOUs Found Beneath Bloomberg's New London HQ|date=2016-06-01|access-date=2018-06-09}}</ref><ref>{{Cite news|url=http://www.dailymail.co.uk/sciencetech/article-3620788/The-City-s-IOU-2-000-year-old-letters-reveal-daily-life-trade-debts-Roman-London.html|title=Ancient letters reveal daily life, trade and debts in Roman London|work=Mail Online|access-date=2018-06-09}}</ref>  However, [[Ancient Carthage|Carthage]] 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.<ref>{{Cite book |url=https://books.google.com/books?id=IW4vAQAAMAAJ&pg=RA1-PA10&lpg=RA1-PA10 |title=Speeches of J.P. Jones: Money and Tariff, 1890-93 |last=Jones |first=John Percival |date=1890|language=en}}</ref><ref>{{Cite book|url=https://books.google.com/books?id=huYoAAAAYAAJ&pg=PA34&lpg=PA34 |page=134 |title=The Science of Money and American Finances. |last=Moulton |first=Luther Vanhorn |date=1880 |publisher=Co-operative Press |language=en}}</ref><ref>{{Cite book|url=https://archive.org/details/outlineofhistory00wellrich|title=The outline of history, being a plain history of life and mankind |last=Wells |first=H. G. |date=1921 |location=New York |publisher=The Macmillan Company}}</ref> The first known banknote was [[Economy of the Song Dynasty#The world's first paper money|first developed in China]] during the [[Tang Dynasty|Tang]] and [[Song Dynasty|Song]] dynasties, starting in the 7th century. Its roots were in merchant [[receipt]]s of deposit during the Tang Dynasty (618–907), as [[Four occupations#The shang (商)|merchants]] and [[wholesale]]rs desired to avoid the heavy bulk of [[Ancient Chinese coinage|copper coinage]] in large commercial transactions.{{sfnp|Ebrey|Walthall|Dominican Republic |2006|p=156}}{{sfnp|Bowman|2000|p=105}}{{sfnp|Gernet|1962|p=80}} During the [[Yuan Dynasty]], banknotes were adopted by the [[Mongol Empire]]. In Europe, the concept of banknotes was first introduced during the 13th century by travelers such as [[Marco Polo]],<ref name="Goetzmann">{{cite book|author1=William N. Goetzmann|author2=K. Geert Rouwenhorst|title=The Origins of Value: The Financial Innovations that Created Modern Capital Markets|date=1 August 2005|publisher=Oxford University Press|isbn=978-0-19-517571-4|page=94|quote=The Mongols adopted the Jin and Song practice of issuing paper money, and the earliest European account of paper money is the detailed description given by Marco Polo, who claimed to have served at the court of the Yuan dynasty rulers.}}</ref><ref name="Marco Polo">{{cite book|author=Marco Polo|title=The Travels of Marco Polo, a Venetian, in the Thirteenth Century: Being a Description, by that Early Traveller, of Remarkable Places and Things, in the Eastern Parts of the World|url=https://books.google.com/books?id=JetQAAAAcAAJ&pg=PA353|accessdate=19 September 2012|year=1818|pages=353–355}}</ref> with European banknotes appearing in 1661 in Sweden.

[[Counterfeit]]ing, the [[forgery]] of banknotes, is an inherent challenge in issuing [[currency]]. It is countered by anticounterfeiting measures in the [[printing]] of banknotes. Fighting the counterfeiting of banknotes and [[cheque]]s has been a principal driver of [[security printing]] methods development in recent centuries.

==History==
{{Main|History of money}}

Paper currency first developed in [[Tang Dynasty]] China during the 7th century, although true paper money did not appear until the 11th century, during the [[Song Dynasty]]. The usage of paper currency later spread throughout the [[Mongol Empire]] or [[Yuan Dynasty]] China. European explorers like [[Marco Polo]] introduced the concept in Europe during the 13th century.<ref name="Goetzmann"/><ref name="Marco Polo"/> [[Napoleon Bonaparte|Napoleon]] issued paper banknotes in the early 1800s.<ref>{{cite book |title=Security Engineering: A Guide to Building Dependable Distributed Systems |chapter=Chapter12: Security Printing and Seals |page=245 |chapter-url=http://www.cl.cam.ac.uk/~rja14/Papers/SE-12.pdf |quote=The introduction of paper money into Europe by Napoleon in the early 1800s, and of other valuable documents such as bearer securities and passports, kicked off a battle between security printers and counterfeiters}}</ref> 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]]. Banknotes were seen by some as an [[I.O.U.]] or [[promissory note]]: a promise to pay someone in precious metal on presentation (see [[representative money]]), but were readily accepted - for convenience and security - in the City of London for example from the late 1600s onwards. With the removal of precious metals from the monetary system, banknotes evolved into pure [[fiat money]].

===Early Chinese paper money===
[[File:Jiao zi.jpg|thumb|upright|right|Song Dynasty ''Jiaozi'', the world's earliest paper money.]]
{{See also|List of Chinese inventions|Economy of the Song Dynasty|Jiaozi (currency)}}
Development of the banknote began in the [[Tang Dynasty]] during the 7th century, with local issues of paper currency, although true paper money did not appear until the 11th century, during the [[Song Dynasty]].<ref name="Bernholz">{{cite book|author=Peter Bernholz|title=Monetary Regimes and Inflation: History, Economic and Political Relationships|year=2003|publisher=Edward Elgar Publishing|isbn=978-1-84376-155-6|page=53}}</ref><ref name="Headrick">{{cite book|author=Daniel R. Headrick|title=Technology: A World History|date=1 April 2009|publisher=Oxford University Press|isbn=978-0-19-988759-0|page=85}}</ref> Its roots were in merchant [[receipt]]s of deposit during the Tang Dynasty (618–907), as [[Four occupations#The shang (?)|merchants]] and [[wholesaler]]s desired to avoid the heavy bulk of [[Chinese coins|copper coinage]] in large commercial transactions.{{sfnp|Ebrey|Walthall|Palais |2006|p=156}}{{sfnp|Bowman|2000|p=105}}{{sfnp|Gernet|1962|p=80}}

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 they had with that person. If they showed the paper to that person, they could regain their money. Eventually, the Song Dynasty paper money called "[[Jiaozi (currency)|jiaozi]]" originated from these [[promissory note]]s.

By 960 the [[Song Dynasty]], 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 [[money|specie]]. 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.{{sfnp|Ebrey|Walthall|Palais |2006|p=156}} 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.{{sfnp|Gernet|1962|p=80}} By the 1120s the central government officially stepped in and produced their own state-issued paper money (using [[woodblock printing]]).{{sfnp|Ebrey|Walthall|Palais |2006|p=156}}

[[File:Yuan dynasty banknote with its printing plate 1287.jpg|thumb|upright=1.5|left|A Yuan dynasty printing plate and banknote with Chinese and Mongol words.]]
Even before this point, the Song government was amassing large amounts of paper [[tribute]]. It was recorded that each year before 1101 AD, the prefecture of [[Huizhou (region)|Xin'an]] (modern [[She County, Anhui|Shexian]], [[Anhui]]) alone would send 1,500,000 sheets of paper in seven different varieties to the capital at Kaifeng.{{sfnp|Needham|1986|p.47}} 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.{{sfnp|Needham|1986|p.48}} 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]],{{which|date=July 2018}}<!-- Anhui or Guangdong --> [[Chengdu]], [[Hangzhou]], and [[Anqi]].{{sfnp|Needham|1986|p.48}}

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.{{sfnp|Needham|1986|p.48}} 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 three years.{{sfnp|Gernet|1962|p=80}}

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.{{sfnp|Gernet|1962|p=80}} The range of varying values for these banknotes was perhaps from one string of cash to one hundred at the most.{{sfnp|Gernet|1962|p=80}} 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.

The founder of the [[Yuan Dynasty]], [[Kublai Khan]], issued paper money known as [[Chao (currency)|Chao]] 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, they 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.

===European explorers and merchants===
According to a travelogue of a visit to Prague in 960 by [[Ibrahim ibn Yaqub]], small pieces of cloth were used as a means of trade, with these cloths having a set exchange rate versus silver.<ref>Jankowiak, Marek. ''Dirhams for slaves''. Medieval Seminar, All Souls, 2012, p.8</ref>

Around 1150, the [[History of the Knights Templar#Bankers|Knights Templar]] issued bank notes to pilgrims. Pilgrims deposited their valuables with a local Templar preceptory before embarking, received a document indicating the value of their deposit, then used that document upon arrival in the Holy Land to retrieve their funds in an amount of treasure of equal value.<ref>{{Cite book |title=Templar Order |last=Sarnowsky |first=Jürgen |year=2011 |isbn=978-9-0041-4666-2|doi = 10.1163/1877-5888_rpp_com_125078}}</ref><ref>{{Cite book |title=The Knights Templar: The History and Myths of the Legendary Military Order|last=Martin |first=Sean |date=2004 |publisher=Thunder's Mouth Press |isbn=978-1560256458 |edition=1st |location=New York |oclc=57175151}}</ref>

[[File:Marco Polo, Il Milione, Chapter CXXIII and CXXIV.jpg|thumb|upright=.85|[[Marco Polo]] described the use of early banknotes in China to [[Medieval Europe]] in his book, ''[[The Travels of Marco Polo]]''.]]
In the 13th century, Chinese paper money of Mongol Yuan became known in Europe through the accounts of travelers, such as [[Marco Polo]] and [[William of Rubruck]]<!-- Giljom de Rubruk -->.<ref name="Goetzmann"/><ref>{{cite book|last=Moshenskyi|first=Sergii|title=History of the weksel: Bill of exchange and promissory note|year=2008|isbn=978-1-4363-0694-2|page=55}}</ref> Marco Polo's account of paper money during the [[Yuan Dynasty]] is the subject of a chapter of his book, ''[[The Travels of Marco Polo]]'', titled "[[Wikisource:The Travels of Marco Polo/Book 2/Chapter 24|How the Great Kaan Causeth the Bark of Trees, Made Into Something Like Paper, to Pass for Money All Over his Country]]."<ref name="Marco Polo"/>

{{quote|All these pieces of paper are, issued with as much solemnity and authority as if they were of pure gold or silver... with these pieces of paper, made as I have described, [[Kublai Khan]] causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extends... and indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan's dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold|[[Marco Polo]]|''[[The Travels of Marco Polo]]''}}

In [[Middle Ages|medieval]] [[Italy]] and [[Count of Flanders|Flanders]], because of the insecurity and impracticality of transporting large sums of cash over long distances, money traders started using [[promissory note]]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.<ref name="Geld 1992, page 96">De Geschiedenis van het Geld (the History of Money), 1992, Teleac, page 96</ref> 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. 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.

===Birth of European banknotes===
[[File:Sweden-Credityf-Zedels.jpg|thumb|left|The first paper money in Europe, issued by the [[Stockholms Banco]] in 1666.<ref>{{cite web |url=http://urn.kb.se/resolve?urn=urn:nbn:se:alvin:portal:record-47808 |title=Sverige, Palmstruchska banken, Kreditsedel 10 daler silvermynt, 17 april 1666  |trans-title=Europe's first banknotes |language=sv |website=Alvin}}</ref>]]
The shift toward the use of these receipts as a means of payment took place in the mid-17th century, as the [[price revolution]], when relatively rapid gold inflation was causing a re-assessment of how money worked. The [[goldsmith]]-bankers of [[London]] 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.<ref>
{{Cite journal |ssrn=2244977 |title=Money Creation: Genesis 2: Goldsmith-Bankers and Bank Notes |author=Faure AP |journal=Social Science Research Network |date=6 Apr 2013}}</ref> The bankers also began issuing a [[Fractional reserve banking|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 (currency)|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.<ref name="Geld 1992, page 96"/><ref>{{cite book |url=https://books.google.com/books?id=0owO86az53EC&pg=PA132 |title=The History of Money for Understanding Economics |author=Vincent Lannoye |year=2011 |publisher=Vincent Lannoye| page=132 |isbn=978-1-4802-0066-1}}</ref>

The first short-lived attempt at issuing banknotes by a central bank was in 1661 by [[Stockholms Banco]], a predecessor of Sweden's central bank [[Sveriges Riksbank]].<ref>{{cite book |last=Geisst |first=Charles R. |title=Encyclopedia of American business history |year=2005 |location=New York |isbn=978-0-8160-4350-7 |page=39}}</ref> These replaced the copper-plates being used instead as a means of payment.<ref>{{cite book |author=Karl Gunnar Persson |page=137 |url=https://books.google.com/books?id=kYJtS1MdKlsC&pg=PA137 |title=An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present |publisher=Cambridge University Press |date=28 January 2010 |isbn=978-0521549400 |access-date=2012-06-03}}</ref> This banknote issue was brought about by the peculiar circumstances of the Swedish coin supply. Cheap foreign imports of [[copper]] had forced [[Monarchy of Sweden|the Crown]] to steadily increase the size of the copper coinage to maintain its value relative to [[silver]]. 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 ''[[Sveriges Riksbank|Riksens Ständers Bank]]'' was established in 1668, but did not issue banknotes until the 19th century.<ref>{{cite web |url=http://www.citedeleconomie.fr/The-first-European-banknote|title=The first European banknote |website=Cité de l’économie et de la monnaie}}</ref>

===Permanent issue of banknotes===
[[File:Bank of England Charter sealing 1694.jpg|thumb|right|The sealing of the [[Bank of England]] Charter (1694). The Bank began the first permanent issue of banknotes a year later.]]
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]] wrote that money "was an imaginary value made by a law for the convenience of exchange."<ref>Nicholas Barbon, ''Discourse On Trade'', 1690. p.37</ref>  A temporary experiment of banknote issue was carried out by Sir [[William Phips]] as the Governor of the [[Province of Massachusetts Bay]] in 1690 to help fund the [[Nine Years' War|war effort against France]].<ref>{{cite book|url=https://books.google.com/books?id=yY_1a6QDLdEC|title=The Last Revolution: 1688 and the Creation of the Modern World|author=Patrick Dillon|year=2007|publisher=Random House|pages=344–346|isbn=9781844134083}}</ref>

[[File:Benjamin Franklin nature printed 55 dollar front 1779.jpg|thumb |left |Fifty-five dollar bill in [[Continental currency]]; leaf design by Benjamin Franklin, 1779]]
The first bank to initiate the permanent issue of banknotes was the [[Bank of England]]. Established in 1694 to raise money for the funding of the [[Nine Years War|war]] against [[France]], 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]] first appeared in 1855.<ref>{{Cite web |url=http://www.bankofengland.co.uk/banknotes/pages/about/history.aspx |title=A brief history of banknotes |accessdate=2013-12-17 |publisher=Bank of England |dead-url=yes |archive-url=https://web.archive.org/web/20130929010128/http://www.bankofengland.co.uk/banknotes/pages/about/history.aspx |archive-date=2013-09-29}}</ref>

The Scottish economist [[John Law (economist)|John Law]] helped establish banknotes as a formal currency in France, after the wars waged by [[Louis XIV of France|Louis XIV]] left the country with a shortage of precious metals for coinage.

In the [[United States]] there were early attempts at establishing a central bank in [[First Bank of the United States|1791]] and [[Second Bank of the United States|1816]], but it was only in 1862 that the [[federal government of the United States]] began to print banknotes.

===Central bank issuance of legal tender===
[[Image:London.bankofengland.arp.jpg|thumb|right|The [[Bank of England]] gained a monopoly over the issue of banknotes with the [[Bank Charter Act 1844|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 Act]]s established that banknotes would be considered as [[legal tender]] during peacetime.<ref>{{Cite web |url=http://www.legislation.gov.uk/ukpga/1928/13/pdfs/ukpga_19280013_en.pdf |title=Currency and Bank Notes Act, 1928 |website=www.legislation.gov.uk |accessdate=2012-12-17}}</ref>

Until the mid-nineteenth century, commercial banks were able to issue their own banknotes, and notes issued by provincial [[bank]]ing companies were the common form of currency throughout England, outside London.<ref>{{cite web |title=£2 note issued by Evans, Jones, Davies & Co.|url=https://www.britishmuseum.org/explore/highlights/highlight_objects/cm/others/%c2%a32_note_issued_by_evans,_jones.aspx |publisher=British Museum |accessdate=31 October 2011 |deadurl=yes |archiveurl=https://web.archive.org/web/20120118104053/http://www.britishmuseum.org/explore/highlights/highlight_objects/cm/others/%c2%a32_note_issued_by_evans,_jones.aspx |archivedate=18 January 2012 |df=dmy-all}}</ref> The [[Bank Charter Act 1844|Bank Charter Act of 1844]], which established the modern central bank,<ref>{{Cite book |chapter-url=http://eprints.lse.ac.uk/39606/ |last1=Capie |first1=Forrest |last2=Fischer |first2=Stanley |last3=Goodhart |first3=Charles |last4=Schnadt |first4=Norbert |year=1994 |title=The future of central banking: the tercentenary symposium of the Bank of England |publisher=Cambridge University Press |location=Cambridge, UK |isbn=978-0-5214-9634-6 |chapter=The development of central banking |via=LSE Research Online |accessdate=2012-12-17}}</ref> restricted authorisation to issue new banknotes to the [[Bank of England]], which would henceforth have sole control of the [[money supply]] 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.<ref>{{cite web |author=Jeffrey A. Tucker |url=http://blog.mises.org/13920/yesterday-was-a-historic-day/ |title=Yesterday was a Historic Day |website= Mises Wire |publisher=Mises Institute |date=16 September 2010 |accessdate=2010-09-17| archiveurl= https://web.archive.org/web/20100918034732/http://blog.mises.org/13920/yesterday-was-a-historic-day/| archivedate= 18 September 2010 | deadurl= no}}</ref><ref>{{cite journal |title=The Origins of the Bank Charter Act, 1844 |first=J. K. |last=Horsefield |journal=Economica |series=New |volume=11 |issue=44 |date=Nov 1944 |pages=180–189 |doi=10.2307/2549352 |jstor=2549352 }}</ref>

==Issue of banknotes==
Generally, a [[central bank]] or treasury is solely responsible within a state or [[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]]s.[[File:Five dollar Banknote of Citizens Bank of Louisiana.jpg|thumb|A $5 note issued by Citizens Bank of Louisiana in the 1850s.]]

[[File:Bank of Scotland 20 pound note 2007.jpg|thumb|upright=1.5|left|Example of a banknote issued by a commercial bank: a 2007 £20 note issued by the [[Bank of Scotland]]]]
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]]s in two of the [[Countries of the United Kingdom|state's four constituent countries]] ([[Scotland]] and [[Northern Ireland]]) continue to print their own banknotes for domestic circulation, even though they are not [[fiat money]] or declared in law as [[legal tender]] anywhere. The UK's central bank, the [[Bank of England]], prints notes which are legal tender in [[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]]).

In the two [[Special Administrative Region|Special Administrative Regions of the People's Republic of China]], arrangements are similar to those in the UK; in Hong Kong, three commercial banks are licensed to issue [[Banknotes of the Hong Kong dollar|Hong Kong dollar notes]],<ref name="BIS">{{cite web |url = http://www.bis.org/publ/cpss55.pdf |title = The Role of Central Bank Money in Payment Systems |accessdate =14 August 2008 |author=Committee on Payment and Settlement Systems |publisher= Bank for International Settlements |date=August 2003 |page = 96 |quote = Although historically not the case, these days banknotes are usually issued only by the central bank. This is broadly the case in all CPSS economies, except Hong Kong SAR, where banknotes are issued by three commercial banks. Singapore and the United Kingdom are more limited exceptions. Singapore dollar banknotes have been issued by the Board of Currency Commissioners, a government agency, although following the merger of the Board into the MAS in October 2002 this is no longer the case. In the United Kingdom, Scottish banks retain the right to issue banknotes alongside those of the Bank of England and three banks currently still do so. | archiveurl= https://web.archive.org/web/20080909222757/http://www.bis.org/publ/cpss55.pdf| archivedate= 9 September 2008 | deadurl= no}}</ref> and in [[Macau]], banknotes of the [[Macanese pataca]] are issued by two different commercial banks. In [[Luxembourg]], the [[Banque Internationale à Luxembourg]] was entitled to issue its own [[Luxembourgish franc]] notes until the introduction of the [[Euro]] in 1999.<ref name=bil>{{cite web|title=BIL's history |url=https://www.bil.com/en/corporate/history/Pages/default.aspx |publisher=Banque Internationale à Luxembourg |accessdate=13 December 2013}}</ref>

As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002 the [[Singapore dollar]] was issued by the [[Board of Commissioners of Currency Singapore]], a government agency which was later taken over by the [[Monetary Authority of Singapore]].<ref name="BIS"/>

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.<ref>{{cite web|url=https://www.pmgnotes.com/news/article/4801/Error-Is-Human-Part-I/|title=Error Is Human: Part I - PMG|website=www.pmgnotes.com|accessdate=16 April 2018}}</ref>

==Advantages and disadvantages==
[[File:Brazil Portinari banknote obverse.jpg|thumb|When Brazil changed currencies in 1989, the 1000, 5000, and 10,000 [[Brazilian cruzado|cruzados]] banknotes were overstamped and issued as 1, 5, and 10 [[Brazilian cruzado novo|cruzados novos]] banknotes for several months before novo cruzado banknotes were printed and issued. Banknotes can be overstamped with new denominations, typically when a country converts to a new currency at an even, fixed exchange rate (in this case, 1000:1).]]
Prior to the introduction of banknotes, precious or semiprecious metals minted into [[coin]]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]]s had [[counterparty risk]], 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]]. The durability of [[coin]]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]]s salvaged from shipwrecks retain almost all of their original appearance, but silver [[coin]]s slowly corrode.<ref>Famous shipwrecks from which valuable precious metals and [[coin]]s were recovered in recent years include the ''[[Nuestra Señora de Atocha|Atocha]]'' and the ''[[SS Central America]]''. Shipwreck [[coin]]s are highly collectible and dealers post photos on the internet.</ref><ref>{{cite web|url=http://www.sedwickcoins.com/map/map.html|title=Virtual Shipwreck and Hoard Map by Daniel Frank Sedwick, LLC|work=sedwickcoins.com}}</ref>

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.{{sfnp|Atack|Passell|1994|pp=84–86}}<ref name="Taylor 1951">
{{cite book |title=The Transportation Revolution, 1815–1860
|last=Taylor |first= George Rogers
|year=1951 |publisher = Rinehart & Co.
|location=New York, Toronto
|isbn= 978-0-87332-101-3}}
</ref> The problem of discounting within a country does not exist with national currencies; however, under [[floating exchange rate]]s currencies are valued relative to one another in the [[foreign exchange market]].
#[[Counterfeit money|Counterfeiting]] paper notes has always been a problem, especially since the introduction of [[photocopiers|color photocopiers]] and computer [[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]]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 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===
[[File:US $20 Series 2006 Obverse.jpg|thumb |right |A [[United States twenty-dollar bill|US twenty-dollar paper banknote]]]]
Most banknotes are made from [[cotton paper]] with a weight of 80 to 90&nbsp;grams per square meter. The cotton is sometimes mixed with [[linen]], [[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),<ref name="DeLaRue">{{cite web |url=http://www.delarue.com/ProductsSolutions/BanknoteProduction/TheBanknoteLifecyc/ |title=The Banknote Lifecycle — from Design to Destruction |website=De La Rue |dead-url=yes |archive-url=https://web.archive.org/web/20120513043414/http://www.delarue.com/ProductsSolutions/BanknoteProduction/TheBanknoteLifecyc/ |archive-date=2012-05-13}}</ref> and also does not contain the usual agents that make ordinary paper glow slightly under [[ultraviolet]] 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]] bark. Mitsumata (''[[Edgeworthia chrysantha]]'') and other fibers are used in Japanese banknote paper<ref>{{cite web |url=http://www.npb.go.jp/en/intro/seizou.html |publisher=[Japanese] National Printing Bureau |title=Banknote Production Process |website=www.npb.go.jp |accessdate=16 April 2018}}</ref> (a kind of [[Washi]]).
[[File:Money poster.JPG|thumb|right|Paper money from different countries]]
Most banknotes are made using the mould made process in which a [[watermark]] 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]] 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====
When paper bank notes were first introduced in England in the 1790s, they resulted in a dramatic rise in counterfeiting.{{cn|date=September 2018}} 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.<ref>{{Cite journal |title= How Criminal were the Irish? Bias in the Detection of London Currency Crime, 1797-1821 |journal= The London Journal |volume=43 |issue=1 |pages=36–52 |date= 2018 |doi= 10.1080/03058034.2016.1270876 |first= Adam |last= Crymble }}</ref> 

The characteristics of bank notes, 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.<ref>[[#mockford-2014|Mockford, 2014; pp. 118-119]] quote="Detailed discussion of the material characteristics of Bank Notes, as well as the methods used in their construction, have therefore tended to constitute merely a footnote in historical works that have often prioritised both contemporary and modern theoretical understandings of money and exchange."</ref> 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 XVIII century, far less banknotes were circulating in England compared to the boom of bank notes in the XIX century and, because of this, improving notes making techniques wasn't considered an impelling issue.

In the XVIII century, bank notes were produced mainly through [[copper-plate engraving]] and [[printing]] and they were single-sided. Notes making technologies remained basically the same during the XVIII century<ref>[[#mockford-2014|Mockford, 2014; p. 121]] quote="The technologies employed by the Bank in the making of its notes were ones that altered very little throughout the course of the long eighteenth century, with major changes not occurring until well after the close of this period."</ref> The first banknotes were produced through the so-called ''[[intaglio printing]]'', 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 and consulting paper makers, in order to make a similar kind of paper by themselves.<ref name=mockford_122-123>[[#mockford-2014|Mockford, 2014; pp. 122-123]]</ref> Furthermore, [[watermark|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.<ref name=mockford_122-123/> 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 XIX 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.<ref>[[#mockford-2014|Mockford, 2014; pp. 122-123]]</ref> In 1801, [[watermarks]], 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<ref>[[#mockford-2014|Mockford, 2014; pp. 126]]</ref> 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").<ref>[[#mockford-2014|Mockford, 2014; p. 127]]</ref>

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]] during the [[American Revolution]], the [[Assignat]]s produced during the [[French Revolution]], the paper currency produced by the [[Confederate States of America]] and the [[Southern States Confederate Currency|individual states of the Confederate States of America]], the financing of World War I by the [[Central Powers]] (by 1922 1 gold [[Austro-Hungarian krone]] of 1914 was worth 14,400 paper Kronen), the devaluation of the [[Yugoslav dinar|Yugoslav Dinar]] 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]] produced the 5000 [[Austrian schilling|Schilling]] banknote ([[Mozart]]), which is the first foil application ([[Kinebar|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===
{{Main|Polymer banknote}}
[[File:ROL 2000 1999 obverse.jpg|right|thumb|A [[Two thousand lei|2000 Romanian lei]] polymer banknote]]
In 1983, [[Costa Rica]] and [[Haiti]] issued the first [[Tyvek]] and the [[Isle of Man]] issued the first [[Bradvek]] polymer (or plastic) banknotes; these were printed by the [[American Banknote Company]] and developed by [[DuPont]]. 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]] (CSIRO) and the [[Reserve Bank of Australia]], Australia produced the first [[polymer banknote]] 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]], Brazil, [[Brunei]], Canada, [[Chile]], Guatemala, [[Dominican Republic]], Indonesia, [[Israel]], Malaysia, [[Mexico]], Nepal, New Zealand, Papua New Guinea, [[Paraguay]], [[Romania]], [[Samoa]], Singapore, the [[Solomon Islands]], [[Thailand]], the United Kingdom, Vietnam, and [[Zambia]], with other countries issuing commemorative polymer notes, including China, Kuwait, the [[Northern Bank]] of [[Northern Ireland]], Taiwan and Hong Kong.<ref>{{cite web |website=About Australia |url=http://www.dfat.gov.au/facts/currency.html |title=Our Currency |publisher=Australian Government |accessdate=19 July 2011 |archiveurl= https://web.archive.org/web/20110607104633/http://www.dfat.gov.au/facts/currency.html |archivedate= 7 June 2011 |deadurl= yes}}</ref> Another country indicating plans to issue polymer banknotes is [[Nigeria]]. In 2005, [[Bulgaria]] issued the world's first hybrid paper-polymer banknote.

Polymer banknotes were developed to improve durability and prevent [[counterfeit]]ing through incorporated security features, such as [[optically variable devices]] that are extremely difficult to reproduce.

===Other materials===
[[File:Bielefeld Germany 25 Mark 1921. Silk Banknote.jpg|left|thumb|[[Bielefeld]] Germany 25 Mark 1921. Silk Banknote.<ref>Walter Grasser / Albert Pick: Das Bielefelder Stoffgeld 1917 - 1923, Berlin 1972 (German)</ref>]]
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.
[[File:Russian-American Co - 1 Ruble (7559).jpg|thumb|[[Russian American Company]]-issued [[Alaskan parchment scrip]] (c. 1852)]]
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]] is the material of the banknotes in the United States. Leather banknotes (or coins) were issued in a number of [[siege]]s, 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 Baltic states, 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]] 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.<ref>{{cite journal |title=Bisphenol S, a New Bisphenol Analogue, in Paper Products and Currency Bills and Its Association with Bisphenol A Residues |author=Liao C |author2=Liu F |author3= Kannan K |pmid=22591511 |doi=10.1021/es300876n |volume=46 |issue=12 |date=2012 |journal=Environmental Science & Technology |pages=6515–6522}}</ref>

===Vertical orientation===
[[File:COP50000 frente rotated.jpg|thumb|upright=.5|The Colombian 50,000 peso note, presented in a vertical format.]]

Vertical currency is a type of [[currency]] 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 machine]]s. They also note how money transactions are conducted vertically not horizontally.<ref>{{cite web |date=14 August 2010 |url=http://dowlingduncan.com/2010/dowling-duncan-redesign-us-bank-notes/ |website=Dowling &#124; Duncan |title=Dowling Duncan redesign the US banknotes |accessdate=2012-08-15 |dead-url=yes |archive-url=https://web.archive.org/web/20110423032115/http://dowlingduncan.com/2010/dowling-duncan-redesign-us-bank-notes/# |archive-date=2011-04-23}}</ref> [[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 has now reverted to horizontal orientation.<ref>{{Cite web | url=http://www.newbanknotes.org.il/en/?wb48617274=7A167B2C | title=השטרות החדשים של ישראל}}</ref>

Since 1979, [[Sri Lankan rupee|Sri Lanka]] has printed the reverse of its banknotes vertically. The 2018 [[Banknotes of the Hong Kong dollar|Hong Kong dollar banknotes]] series has the obverse in traditional horizontal layout, while the reverse is in vertical format.<ref>{{cite press release |date=24 July 2018 |url=http://www.hkma.gov.hk/eng/key-information/press-releases/2018/20180724-5.shtml |title=2018 New Series Hong Kong Banknotes |publisher=[[Hong Kong Monetary Authority]] |accessdate=24 July 2018}}</ref>

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.<ref>{{cite web |author=Brett Bundale |date=8 March 2018 |url=https://www.thestar.com/news/canada/2018/03/08/10-bill-featuring-canadian-civil-rights-icon-viola-desmond-to-be-unveiled.html |title=Canada unveils $10 bill featuring civil rights icon Viola Desmond |website=The Star |publisher=Toronto Star Newspapers |accessdate=16 April 2018}}</ref><ref>{{cite press release |url=https://www.bankofcanada.ca/2018/03/new-10-bank-note-featuring-viola-desmond-unveiled/ |title=New $10 bank note featuring Viola Desmond unveiled on International Women’s Day |publisher=Bank of Canada |date=8 March 2018 |accessdate=16 April 2018}}</ref> The [[Banknotes of Northern Ireland|Northern Irish £5 and £10 notes]] issued by [[Ulster Bank]] for 2019 will also be presented in this way.<ref>{{cite news |url=https://www.irishnews.com/news/northernirelandnews/2018/05/24/news/ulster-bank-unveils-new-vertical-banknotes-1337821/ |title=Ulster Bank reveals 'vertical' banknotes |work=The Irish News |date=24 May 2018 |accessdate=25 May 2018}}</ref>

==Vending machines and banknotes==

People are not the only economic actors who are required to accept 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==
{{See also|Money burning}}

In the United States, banknotes last an average of three years until they are no longer fit for circulation, after which they are collected for destruction, usually recycling or shredding.<ref>{{cite web|title=Facts About U.S. Money|url=http://www.factmonster.com/ipka/A0774850.html|website=Factmonster.com|accessdate=19 July 2011| archiveurl= https://web.archive.org/web/20110716105904/http://www.factmonster.com/ipka/A0774850.html| archivedate= 16 July 2011 <!--DASHBot-->| deadurl= no}}</ref> A banknote is removed from the money supply by banks or other financial institutions because of everyday [[wear and tear]] 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:

{{quote|text=Types of contaminants include: notes found on a corpse, stagnant water, contaminated by human or animal body fluids such as urine, feces, vomit, infectious blood, fine hazardous powders from detonated explosives, [[dye pack]] and/or drugs...<ref>{{Cite news|url=https://www.thestar.com/Business/article/261441|title=Bankers wipe out dirty money|last=Trichur|first=Rita|work=Toronto Star|date=28 September 2007|accessdate=28 September 2007| archiveurl= https://web.archive.org/web/20071016064131/http://www.thestar.com/Business/article/261441| archivedate= 16 October 2007 <!--DASHBot-->| deadurl= no}}</ref>}}

These are removed from circulation primarily to prevent the spread of diseases.

When taken out of circulation, Australian plastic/polymer bank notes are melted down and mixed together to form plastic garbage bins.<ref>{{cite web|last=Rhodes|first=Trissie|title=Australian Polymer Banknotes |url=http://www.therightnote.com.au/shop650/shopcontent.asp?type=polymer|website=Therightnote.com.au|accessdate=27 June 2011|archive-url=https://web.archive.org/web/20110216065555/http://www.therightnote.com.au/shop650/shopcontent.asp?type=polymer |archive-date=16 February 2011|dead-url=yes|df=dmy-all}}</ref>

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 in small bags as [[souvenir]]s.<ref name="FED">{{cite web|url= http://www.newyorkfed.org/aboutthefed/fedpoint/fed11.html|title= FED|accessdate= 2006-08-21}}</ref>

==Intelligent banknote neutralisation system==
[[Intelligent banknote neutralisation system]]s (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 machine]]s, 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.<ref>{{cite web|url=http://www.digitaljournal.com/pr/2518003|title=EDAQS Publishes the DICE – The New Banknote Technology That Protects Citizens and Fights Crime|work=digitaljournal.com}}</ref>
<ref>{{cite news| url=http://www.linkedin.com/pulse/future-banknotes-how-one-company-working-prevent-clinton-gonsalvez | work=LinkedIn Pulse | title=The Future Of Banknotes & How One Company Is Working To Prevent A Cashless Economy | date=18 May 2015}}</ref>

==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.<ref>{{cite web |url=http://www.isil.org/resources/lit/looting-of-america.html |title=International Society for Individual Liberty |archive-url=https://web.archive.org/web/20120609090225/http://www.isil.org/resources/lit/looting-of-america.html |archive-date=9 June 2012 }}</ref> 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.<ref>{{cite web|url=http://ndsn.org/dec94/dog.html|title=Drug Dog's "Alert" to Cash Not Grounds for Forfeiture When Up to 75 percent of Currency Tainted With Drugs|work=ndsn.org}}</ref> In 1994, the United States 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.<ref>{{cite web|url=http://bulk.resource.org/courts.gov/c/F3/39/39.F3d.1039.92-55919.html|title=Resource.org|publisher=|accessdate=16 April 2018|archive-url=https://web.archive.org/web/20130603030836/https://bulk.resource.org/courts.gov/c/F3/39/39.F3d.1039.92-55919.html|archive-date=3 June 2013|dead-url=yes|df=dmy-all}}</ref>

==Displacement by electronic currency==

Banknotes have increasingly been displaced by credit and debit cards and electronic money transfers. Some governments, such as Canada, are considering replacing paper notes and coins with [[digital currency]].<ref>{{cite news| url=https://www.pcmag.com/article2/0,2817,2402982,00.asp | work=PC Magazine | first=Adario | last=Strange | title=Canada Asks Developers to Create Digital Currency | date=13 April 2012}}</ref><ref>{{cite web |author=Randy Boswell |date=6 April 2012 |title=Canada unveils digital currency |url=https://montrealgazette.com/business/Canada+unveils+digital+currency/6419676/story.html |work=The Gazette |archive-url=https://web.archive.org/web/20120410222104/http://www.montrealgazette.com/business/Canada%2Bunveils%2Bdigital%2Bcurrency/6419676/story.html |archive-date=10 April 2012 }}</ref> Sweden has begun implementing digital currency.<ref>{{cite web|author=Malin Rising |url=https://news.yahoo.com/sweden-cash-king-no-more-082544562.html |title=In Sweden, cash is king no more - Yahoo! News |publisher=News.yahoo.com |date=2012-03-17 |accessdate=2012-08-15}}</ref>

==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.{{Citation needed|date=September 2014}} Online catalogs and clubs also have a big role with the popularization of collecting banknotes.

Since 2007 Sanjay Relan, of Hong Kong, has held the Guinness world record for collecting 221 banknotes representing 221 different countries. For a short period in 2007, he also held the Guinness world record for collecting 235 coins representing 235 different countries.<ref>{{cite web|url=http://www.banknote.pro/articles/143922/Paper-Money-Collecting-as-a-Hobby |title=Paper Money Collecting as a Hobby |publisher=Banknote.pro |accessdate=27 August 2011 |deadurl=yes |archiveurl=https://web.archive.org/web/20120331082631/http://www.banknote.pro/articles/143922/Paper-Money-Collecting-as-a-Hobby |archivedate=31 March 2012 }}</ref>

===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.<ref>{{cite web | url=http://www.consumerfraudreporting.org/checkcashingscams.php | title=You Won a Lottery, Got an Award, or a Mystery Shopper Job and They Sent You a Check! Counterfeit Cashiers Checks | publisher=Consumer Fraud Report | accessdate=27 August 2011}}</ref><ref>{{cite web | url=http://www.mebanknotes.com/shop/farbod/forgery.html | title=Forged German Treasure Banknotes | publisher=mebanknotes | date=28 May 2008 | accessdate=27 August 2011}}</ref><ref>{{cite web | url=http://www.pcworld.com/article/161848/2_million_counterfeit_items_removed_from_ebay.html | title=2 Million Counterfeit Items Removed From EBay | publisher=PC World | date=25 March 2009 | accessdate=27 August 2011 | author=Cyndy Aleo-Carreira}}</ref> 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.<ref>{{cite web | url=http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=22989 | title=Long Beach Sale Set|author=Bank Note Reporter|date=August 23, 2011| publisher=World Record Academy | accessdate=27 August 2011}}</ref>

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.<ref>{{cite web | url=http://www.theibns.org/joomla/index.php | title=Introducing the IBNS | publisher=IBNS | accessdate=6 October 2012}}</ref>

===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==
{{Portal|Numismatics|Money}}
{{Columns-list|colwidth=18em|
* [[Bank]]ing
* [[Banknote counter]]
* [[Contaminated currency]] {{nb10}}
* [[De La Rue]]
* [[Federal Reserve Note]]
* [[Giesecke & Devrient]]
* [[Hell money]]
* [[Intaglio (printmaking)|Intaglio]]
* [[J. S. G. Boggs]]
* [[List of motifs on banknotes]]
* [[List of people on banknotes]]
* [[Money creation]]
* [[Polymer banknote]]s
* [[Postal currency]]
* [[Seigniorage]]
* [[Trevett v. Weeden]]
* [[United States Note]]
* [[Used note]]s
}}

==Notes and references==
{{Reflist|2}}

==Bibliography==
* {{cite book |ref=harv |last1=Atack |first1=Jeremy |last2=Passell |first2= Peter |year=1994 |title=A New Economic View of American History |location= New York |publisher =W.W. Norton and Co. |isbn= 978-0-393-96315-1}}
* {{cite book |ref=harv |last=Bowman |first=John S. |year=2000 |title=Columbia Chronologies of Asian History and Culture |location=New York |publisher=Columbia University Press |isbn=978-0-2311-1004-4}}
* {{cite book |ref=harv |last1=Ebrey |last2=Walthall |last3=Palais |year=2006 |title=East Asia: A Cultural, Social, and Political History |location=Boston |publisher=Houghton Mifflin Company |isbn=978-0-6181-3384-0}}
* {{cite book |ref=harv |last=Gernet |first=Jacques |year=1962 |title=Daily Life in China on the Eve of the Mongol Invasion, 1250–1276 |publisher=Stanford University Press |isbn=978-0-8047-0720-6}}
* {{cite book |ref=harv |last=Needham |first=Joseph |year=1986 |title=Science and Civilisation in China: Volume 5, Part 1 |publisher=Cambridge University Press |isbn=978-0-5218-7566-0}}
* {{cite thesis |type=PhD |last=Mockford |first=Jack |date=2014 |title="They are Exactly as Banknotes are": Perceptions and Technologies of Bank Note Forgery During the Bank Restriction Period, 1797-1821 |institution=University of Hertfordshire |url=https://uhra.herts.ac.uk/bitstream/handle/2299/15308/09214226%20-%20Mockford%20Jack%20-%20final%20PhD%20submission.pdf?sequence=1|ref=mockford-2014}}

==External links==
{{Commons category|Banknotes}}
{{Wikisource1911Enc|Bank-Notes}}
* [http://www.pantagraph.com/news/local/counterfeit-money-was-a-major-problem-in-the-s/article_0e46cc92-bcd4-11e1-a21e-0019bb2963f4.html Counterfeit money was a major problem in the 1850s - Pantagraph] (Bloomington, Illinois newspaper)

{{Means of Exchange}}
{{Economic history of China}}
{{Paper products}}
{{Authority control}}

[[Category:Banknotes| ]]
[[Category:Accounting source documents]]
[[Category:Chinese inventions]]
[[Category:Economic history of China]]
[[Category:Paper products]]
[[Category:Watermarking]]
[[Category:Written communication]]