Banknote

Abanknote– also called abill(North American English),paper money,or simply anote– is a type ofnegotiablepromissory note,made by abankor other licensed authority, payable to the bearer on demand. Banknotes were originally issued bycommercial banks,which were legally required toredeemthe notes forlegal 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banknotes only traded at face value in the market served by the issuing bank.Commercial banknotes have primarily been replaced by national banknotes issued bycentral banksormonetary authorities.

National banknotes are often – but not always –legal tender,meaning that courts of law are required to recognize them as satisfactory payment of moneydebts.Historically, banks sought to ensure that they could always pay customers incoinswhen they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history ofcentral banksbacking their currencies in gold or silver. Today, most national currencies have no backing inprecious metalsor commodities and have value only byfiat.With the exception of non-circulating high-value or precious metal issues,coinsare used for lower valued monetary units, while banknotes are used for higher values.

Code of Hammurabi Law 100(c.1755–1750 BC) stipulatedrepaymentof aloanby adebtorto acreditoron aschedulewith amaturity datespecified inwrittencontractual terms.Law 122 stipulated that adepositorofgold,silver,or otherchattel/movable propertyforsafekeepingmust present all articles and a signed contract ofbailmentto anotarybefore depositing the articles with abanker,and Law 123 stipulated that a banker was discharged of anyliabilityfrom a contract of bailment if the notary denied the existence of the contract. Law 124 stipulated that a depositor with a notarized contract of bailment was entitled to redeem the entire value of their deposit, and Law 125 stipulated that a banker wasliablefor replacement of depositsstolenwhile in theirpossession.

InChinaduring theHan dynasty,promissory notesappeared in 118 BC and were made of leather.Romemay have used a durable lightweight substance as promissory notes in 57 AD which have been found inLondon.However,Carthagewas purported to have issued bank notes on parchment or leather before 146 BC. Hence Carthage may be the oldest user of lightweight promissory notes.The first known banknote wasfirst developed in Chinaduring theTangandSongdynasties, starting in the 7th century. Its roots were in merchantreceiptsof deposit during the Tang dynasty (618–907), asmerchantsandwholesalersdesired to avoid the heavy bulk ofcopper coinagein large commercial transactions.During theYuan dynasty(1271–1368), banknotes were adopted by theMongol Empire.In Europe, the concept of banknotes was first introduced during the 13th century by travelers such asMarco Polo,with European banknotes appearing in 1661 in Sweden.

Counterfeiting,including theforgeryof banknotes, is an inherent challenge in issuingcurrency.It is countered byanticounterfeiting measuresin theprintingof banknotes. Fighting the counterfeiting of banknotes andchequeshas been a principal driver ofsecurity printingmethods development in recent centuries.

History

Main article:History of money

Paper currency first developed inTang dynastyChinaduring the 7th century, where it was called "flying money",although true paper money did not appear until the 11th century, during theSong dynasty.The use of paper currency later spread throughout theMongol EmpireorYuan dynastyChina. European explorers likeMarco Polointroduced the concept in Europe during the 13th century.Napoleonissued paper banknotes in the early 1800s.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 onprecious metals.Banknotes were seen by some as anI.O.U.orpromissory note:a promise to pay someone in precious metal on presentation (seerepresentative money). But they were readily accepted – for convenience and security – inLondon,for example, from the late 1600s onwards. With the removal of precious metals from the monetary system, banknotes evolved into purefiat money.

Early Chinese paper money

See also:List of Chinese inventions,Economy of the Song dynasty,andJiaozi (currency)

Song dynastyJiaozi,the world's earliest paper money.

A Yuan dynasty printing plate and banknote with Chinese words.

The first banknote-type instrument was used inChinain the 7th century, during theTang dynasty(618–907). Merchants would issue what are today calledpromissory notesin the form ofreceiptsof deposit towholesalersto avoid using the heavy bulk ofcopper coinagein large commercial transactions.Before these notes, circular coins with a rectangular hole in the middle were used. Multiple coins could be strung together on a rope. Merchants found that the strings were too heavy to carry around easily, especially for large transactions. To solve this problem, coins could be left with a trusted person, with the merchant being given a slip of paper (the receipt) recording how much money they had deposited with that person. When they returned with the paper to that person, their coins would be returned.

True paper money, called "jiaozi",developed from these promissory notes by the 11th century, during theSong dynasty.By 960, the Song government was short of copper for striking coins, and issued the first generally circulating notes. These notes were a promise by the ruler to redeem them later for some other object of value, usuallyspecie.The issue of credit notes was often for a limited duration, and at some discount to the promised amount later. Thejiaozidid not replace coins but was used alongside them.

The central government soon observed the economic advantages of printing paper money, issuing a monopoly for the issue of these certificates of deposit to several deposit shops.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 started to produce its own state-issued paper money (usingwoodblock printing).

Even before this point, the Song government was amassing large amounts of papertribute.It was recorded that each year before 1101, the prefecture ofXin'an(modernShexian,Anhui) alone would send 1,500,000 sheets of paper in seven different varieties to the capital at Kaifeng.In 1101, theEmperor Huizong of Songdecided 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 government established several government-run factories in the cities ofHuizhou,Chengdu,Hangzhou,and Anqi.

The workforce employed in these paper money factories was quite large; it was recorded in 1175 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 areas of the empire, and were valid for use only in a designated and temporary limit of three years.

The geographic limitation changed between 1265 and 1274, when the late southern Song government issued a nationwide paper currency standard, which 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 after 1107, the government printed money in no less than six ink colors and printed notes with intricate designs and sometimes even with mixture of a unique fiber in the paper to combat counterfeiting.

The founder of theYuan dynasty,Kublai Khan,issued paper money known asJiaochao.The original notes were restricted by area and duration, as in the Song dynasty, but in the later years, facing massive shortages of specie to fund their rule, the paper money began to be issued without restrictions on duration. 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 byIbrahim ibn Yaqub,small pieces of cloth were used as a means of trade, with these cloths having a set exchange rate versus silver.

Around 1150, theKnights Templarwould issue notes to pilgrims. Pilgrims would deposit valuables with a local Templar preceptory before embarking for the Holy Land and receive a document indicating the value of their deposit. They would then use that document upon arrival in the Holy Land to receive funds from the treasury of equal value.

Marco Polodescribed the use of early banknotes in China toMedieval Europein his book,The Travels of Marco Polo.

In the 13th century, Chinese paper money of Mongol Yuan became known inEuropethrough the accounts of travelers, such asMarco PoloandWilliam of Rubruck.Marco Polo's account of paper money during theYuan dynastyis the subject of a chapter of his book,The Travels of Marco Polo,titled "How the Great Kaan Causeth the Bark of Trees, Made into Something Like Paper, to Pass for Money All Over his Country".

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 Khancauses 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

InmedievalItalyandFlanders,because of the insecurity and impracticality of transporting large sums of cash over long distances, money traders started usingpromissory notes.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 are seen as a predecessor to regular banknotes by some but are mainly thought of as proto bills of exchange and cheques.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 ofEurope.For international payments, the more efficient and sophisticatedbill 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

The first paper money in Europe, issued by theStockholms Bancoin 1666.

The shift toward the use of these receipts as a means of payment took place in the mid-17th century, as theprice revolution,when relatively rapid gold inflation was causing a re-assessment of how money worked. Thegoldsmith bankersofLondonbegan to give out the receipts as payable to thebearerof 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.The bankers also began issuing agreater value of notes than the total value of their physical reservesin the form of loans, on the assumption that they would not have to redeem all of their issued banknotes at the same time. This was a natural extension of debt-based issuance ofsplit tally sticksused for centuries in places like St. Giles Fair,however done in this way it was able to directly expand the expansion of the supply of circulating money. As these receipts were increasingly used in the moneycirculationsystem, 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.

The first short-lived attempt at issuing banknotes by a central bank was in 1661 byStockholms Banco,a predecessor of Sweden's central bankSveriges Riksbank.These replaced the copper-plates being used instead as a means of payment.This banknote issue was brought about by the peculiar circumstances of the Swedish coin supply. Cheap foreign imports ofcopperhad forcedthe Crownto steadily increase the size of the copper coinage to maintain its value relative tosilver.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, theRiksens Ständers Bankwas established in 1668, but did not issue banknotes until the 19th century.

Permanent issue of banknotes

The sealing of theBank of EnglandCharter (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 economistNicholas Barbonwrote that money "was an imaginary value made by a law for the convenience of exchange".

A temporary experiment of banknote issue was carried out by SirWilliam Phipsas the governor of theProvince of Massachusetts Baystarting on December 20, 1690to help fund thewar effort against France.The otherThirteen Coloniesfollowed in Massachusetts' wake and began issuingbills of credit,an early form of paper currency distinct from banknotes, to fund military expenditures and for use as a commonmedium of exchange.By the 1760s, these bills of credit were used in the majority of transactions in the Thirteen Colonies.

Fifty-five-dollar bill inContinental currency;leaf design by Benjamin Franklin, 1779

The first bank to initiate the permanent issue of banknotes was theBank of England.Established in 1694 to raise money for the funding of thewaragainstFrance,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'ssignaturefirst appeared in 1855.

The Scottish economistJohn Lawhelped establish banknotes as a formal currency in France, after the wars waged byLouis XIVleft the country with a shortage of precious metals for coinage.

In theUnited Statesthere were early attempts at establishing a central bank in1791and1816,but it was only in 1862 that thefederal government of the United Statesbegan to print banknotes.

Central bank issuance of legal tender

TheBank of Englandgained a monopoly over the issue of banknotes with theBank 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 ofBank Charter Actsestablished that banknotes would be considered aslegal tenderduring peacetime.

Until the mid-nineteenth century, commercial banks were able to issue their own banknotes, and notes issued by provincialbankingcompanies were the common form of currency throughout England, outside London.TheBank Charter Act of 1844,which established the modern central bank,restricted authorisation to issue new banknotes to theBank of England,which would henceforth have sole control of themoney supplyin 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.

Issue of banknotes

Collage for banknote design with annotations and additions to show proposed changes (figure rather higher so as to allow room for the No.), Bank of Manchester, UK, 1833. On display at the British Museum in London

Today, acentral bankor treasury is generally solely responsible within a state orcurrency unionfor 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 fromFederal Reserve Notes.

A $5 note issued by Citizens Bank of Louisiana in the 1850s.

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, certaincommercial banksin two of thestate's four constituent countries(ScotlandandNorthern Ireland) continue to print their own banknotes for domestic circulation, even though they are notfiat moneyor declared in law aslegal tenderanywhere. The UK's central bank, theBank of England,prints notes which are legal tender inEngland and Wales;these notes are also usable as money (but not legal tender) in the rest of the UK (seeBanknotes of the pound sterling).

In the twoSpecial Administrative Regions of the People's Republic of China,arrangements are similar to those in the UK; inHong Kong,three commercial banks are licensed to issueHong Kong dollar notes,and inMacau,banknotes of theMacanese patacaare issued by two different commercial banks. InLuxembourg,theBanque Internationale à Luxembourgwas entitled to issue its ownLuxembourgish francnotes until the introduction of theEuroin 1999.

As well as commercial issuers, other organizations may have note-issuing powers; for example, until 2002 theSingapore dollarwas issued by theBoard of Commissioners of Currency, Singapore,a government agency which was later taken over by theMonetary Authority of Singapore.

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.

Advantages and disadvantages

When Brazil changed currencies in 1989, the 1000, 5000, and 10,000cruzadosbanknotes were overstamped and issued as 1, 5, and 10cruzados novosbanknotes for several months before cruzado novo 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 intocoinsto 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 much of the need to carry notes and coins.

Banknotes have a natural advantage over coins in that they are lighter to carry; but they are also less durable than coins. Banknotes issued bycommercial bankshadcounterparty 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 toinflation.The durability of coins 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 coins salvaged from shipwrecks retain almost all of their original appearance, but silver coins slowly corrode.

Other costs of using bearer money include:

1. 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 they sometimes became worthless.The problem of discounting within a country does not exist with national currencies.
2. Counterfeitingpaper notes has always been a problem, especially since the introduction of colorphotocopiersand computerimage scanners.Numerous banks and nations have incorporated many types of countermeasures in order to keep the money secure. However, extremely sophisticated counterfeit notes known assuperdollarshave been detected in recent years.
3. Manufacturing or issue costs. Coins are produced by industrial manufacturing methods that process the precious, semi-precious, or other 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.
4. Wear costs. Banknotes do not loseeconomic valueby 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 and even polymer notes wear out much faster than coins.
5. Cost of transport. Coins can be expensive to transport for high value transactions, but banknotes can be issued in large denominations that are much lighter than the equivalent value in coins.
6. 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 expense of checking the banknote's security features and confirming acceptability of the issuing bank.

The different advantages and disadvantages of 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

Obverse and reverse of an old American $100 note (1928)

Until recently, most banknotes were made fromcotton paperwith a weight of 80 to 90 grams per square meter. The cotton is sometimes mixed withlinen,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 paper banknote is two years),and also does not contain the usual agents that make ordinary paper glow slightly underultravioletlight. 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 ofmulberrybark. Mitsumata (Edgeworthia chrysantha) and other fibers are used in Japanese banknote paper(a kind ofWashi).

Most banknotes are made using the mould made process in which awatermarkand 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 theDe La Ruegroup in the UK. Other related methods include watermarking to reduce the number of corner folds by strengthening this part of the note. Varnishing and coatings reduce the accumulation of dirt on the note for longer durability in circulation.

Many currencies, such as theIndonesian rupiah,vary the sizes of their banknotes by denomination. This is done so that they may be told apart through touch alone.

Another security feature is based on windows in the paper which are covered byholographic foilsto make it very hard to copy. Such technology is applied as aportrait windowfor the higher denominations of the Europa series (ES2) of theeurobanknotes.Windows are also used with the Hybrid substrate fromGiesecke+Devrientwhich is composed of an inner layer of paper substrate with thin outer layers of plastic film for high durability.

History of counterfeiting and security measures

When paper bank notes were first introduced in England, they resulted in a dramatic rise in counterfeiting.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.

The characteristics of banknotes, their materials and production techniques (as well as their development over history) are topics that are not usually thoroughly examined by historians, even though there are now a number of works detailing how bank notes were actually constructed. This is mostly because historians tend to be more interested in a theoretical understanding of how money worked rather than how it was produced.The first great deterrent against counterfeiting was the death penalty for forgers, but this was not enough to stop the rise of counterfeiting. Over the 18th century, far fewer banknotes were circulating in England compared to the boom of bank notes in the 19th century; because of this, improved note-making techniques were not considered a compelling issue.

In the 18th century, banknotes were produced mainly bycopper-plate engravingandprinting,and they were single-sided. Note-making technologies remained largely unchanged during the 18th century.The first banknotes were produced byintaglio printing:this involved engraving a copper plate by hand and then covering it in ink to print the bank notes. Only with this technique, at that time, could one force the paper into the lines of the engraving to make suitable banknotes. Another difficulty in counterfeiting banknotes was the paper, as the type of paper used for banknotes was rather different from the paper commercially available at that time. Despite this, some forgers successfully forged notes by dealing with and consulting paper makers, in order to make a similar kind of paper themselves.Furthermore,watermarked paperhas also been 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 Rice Watkins, aBerkshirepaper maker.Watermarks and special paper made it harder and more expensive to forge banknotes, since more complex and expensive paper-making machines were needed.

In the early 19th century (the so-calledBank Restriction Period,1797–1821), the dramatically increased demand for bank notes slowly forced the banks to refine the technologies employed.In 1801, watermarks, which previously were straight lines, became wavy: an idea of William Brewer, a watermark mould maker. This made counterfeiting bank notes harder still, at least in the short term, and in 1803 the number of forged bank notes fell to just 3000, compared to 5000 the previous year.In the same period, bank notes also started to be double-sided and have more complex patterns, and banks asked skilled engravers and artists to help them make their notes harder to counterfeit (an episode labelled by historians as "the search for the inimitable banknote" ).

The ease with which paper money can be created, by both legitimate authorities and counterfeiters, has led to a temptation in times of crisis such as war or revolution, or merely a spendthrift government, to produce paper money which was not supported by precious metal or other goods; this often led tohyperinflationand a loss of faith in the value of paper money, e.g. theContinental Currencyproduced by theContinental Congressduring theAmerican Revolution,theAssignatsproduced during theFrench Revolution,the paper currency produced by theConfederate States of Americaand theindividual states of the Confederate States of America,the financing of World War I by theCentral Powers(by 1922 1 goldAustro-Hungarian kroneof 1914 was worth 14,400 paper Kronen), the devaluation of theYugoslav dinarin the 1990s, etc. Banknotes may also beoverprintedto reflect political or economic changes that occur faster than new currency can be printed.

In 1988,Austriaproduced the 5000Schillingbanknote (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 common throughout the world. Many countries' banknotes now have embeddedholograms.

Polymer banknotes

Main article:Polymer banknote

A2000 Romanian leipolymer banknote

In 1983,Costa RicaandHaitiissued the firstTyvekand theIsle of Manissued the firstBradvekpolymer (or plastic) banknotes; these were printed by theAmerican Banknote Companyand developed byDuPont.These early plastic notes were plagued with issues such as ink wearing off, and they were discontinued. In 1988, after significant research and development inAustraliaby theCommonwealth Scientific and Industrial Research Organisation(CSIRO) and theReserve Bank of Australia,Australia produced the firstpolymer banknotemade frombiaxially-oriented polypropylene(plastic), and in 1996, Australia became the first country to have a full set of circulating polymer banknotes of all denominations, completely replacing its paper banknotes. Since then, many other countries have adopted circulating polymer banknotes, includingBangladesh,Brazil,Brunei,Canada,Chile,Guatemala,Dominican Republic,Hong Kong SAR (China),Indonesia,Israel,Malaysia,Mexico,Nepal,New Zealand,Nigeria,Papua New Guinea,Paraguay,thePhilippines,Romania,Samoa,Singapore,theSolomon Islands,Thailand,Trinidad and Tobago,theUnited Kingdom,Uruguay,Vietnam,andZambia.Other countries have issued commemorative polymer notes, includingChina,Kuwait,theNorthern BankofNorthern Ireland,Taiwan.In 2005,Bulgariaissued the world's firsthybrid paper-polymer banknote.

Polymer banknotes were developed to improve durability and preventcounterfeitingthrough incorporated security features, such asoptically variable devicesthat are extremely difficult to reproduce.

Other materials

BielefeldGermany 25 Mark 1921. Silk Banknote.

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.

Russian American Company-issuedAlaskan 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 Companypatented banknote paper with embedded silk threads in 1844 and has supplied paper to theUnited States Treasurysince 1879. Banknotes printed on pure silk "paper" include "emergency money"Notgeldissues from a number of German towns in 1923 during a period of fiscal crisis andhyperinflation.Most notoriously,Bielefeldproduced 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 asXin gian g,or Sinkiang, in the United Islamic Republic of EastTurkestanin 1933. Emergency money was also printed in 1902 onkhakishirt fabric during theBoer War.

Cottonfibers together with 25% linen is the material of the banknotes in the United States. Leather banknotes (or coins) were issued in a number ofsieges,as well as in other times of emergency. During theRussian administration of Alaska,banknotes were printed onsealskin.A number of 19th century issues are known in Germanic and Estonia, including the places ofDorpat,Pernau,Reval,Werroand Woiseck. In addition to the Bielefeld issues, other German leatherNotgeldfrom 1923 is known fromBorna,Osterwieck, Paderborn and Pößneck.

Other issues from 1923 were printed on wood, which was also used in Canada in 1763–1764 duringPontiac's Rebellion,and by theHudson's Bay Company.In 1848, inBohemia,wooden checkerboard pieces were used as money.

Evenplaying cardswere 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 theIsle of Manin 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 anendocrine disruptorthat is subject to human dermal absorption through handling banknotes.

Vertical orientation

Vertical currency is a type ofcurrencyin 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 throughATMand othermoney machines.They also note how money transactions are conducted vertically not horizontally.Bermuda,Cape Verde,Organisation of Eastern Caribbean States,Switzerland,andVenezuelahave adopted vertically oriented currency, though Cape Verde has now reverted to horizontal orientation.

Since 1979,Sri Lankahas printed the reverse of its banknotes vertically. Between 1993 and 2013, Brazil has printed banknotes of 5000 and 50000cruzeiros reaisand the firstBrazilian realseries of banknotes has the obverse in traditional horizontal layout, while the reverse is in vertical format. The 2018Hong Kong dollar banknotesseries too has the obverse in traditional horizontal layout, while the reverse is in vertical format.

Early Chinese banknotes were also vertical, due to the direction of Chinese writing.

The2018 Canadian $10 billfeaturing a portrait of Canadian civil rights pioneerViola Desmondis presented in a vertical format.TheNorthern Irish £5 and £10 notesissued byUlster Bankfor 2019 were also presented in this way.

Vending machines and banknotes

In the late 20th century,vending machineswere 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 makedollar coinspopular 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

A5 euro noteso badly damaged it has been torn in half. The note has later been repaired with tape.

A banknote is removed from circulation because of everydaywear and tearfrom its handling. Banknotes are passed through abanknote sortingmachine to assess their authenticity and fitness for circulation, or may be classified unfit for circulation if they are worn, dirty, soiled, damaged, mutilated or torn. Unfit notes are returned to thecentral bankfor secure online destruction by high-speed banknote sorting machines using a cross-cut shredder device similar to apaper shredderwith security level P-5 (pieces smaller than 30 mm²) according to the standard DIN 66399–2. This small size decomposes a banknote into typically more than 500 tiny pieces and rules out reconstruction like a jigsaw puzzle because the shreds from many banknotes are commingled.

A subsequentbriquettorcompresses shredded paper material into a small cylindrical or rectangular form for disposal (e.g.landfillor burning).Before the 1990s, unfit banknotes were destroyed byincineration,with a higher risk of manipulations.

When a Federal Reserve Bank of theUnited Statesreceives a cash deposit from a commercial bank or anotherfinancial institution,it checks the individual notes to determine whether they are fit for future circulation.About one-third of the notes that the Fed receives are unfit, and the Fed destroys them. US dollar banknotes last an average of more than five years.

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

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 packand/or drugs...

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 or given away in small bags assouvenirsor as briquettes.

Polymer banknotesmay be shredded and then melted down andrecycledto form plastic products like building components, plumbing fittings, or compost bins.

• Shredded Banknotes
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  Fed Shreds as souvenir from theFederal Reserve Bank of San Francisco
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  Shreds of unfitUS dollarnotes with a typical size of less than 1.5 mm × 16 mm
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  Shredded and briquetted US dollar notes from theFederal Reserve Bank of New York(approx. 1000 pieces, 1 kg)
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  Shredded and briquettedUS dollarnotes from theFederal Reserve Bank of New York(approx. 1000 pieces, 1 kg)
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  Shredded and briquettedeurobanknotes from theDeutsche Bundesbank,Germany (approx. 1 kg)

Intelligent banknote neutralisation systems

Intelligent banknote neutralisation systems(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 inautomated teller machines,retail machines, and duringcash-in-transitoperations.

Dynamic Intelligent Currency Encryption

Dynamic Intelligent Currency Encryption(DICE) is a security technology introduced in 2014 by 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 areunforgeableand 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.

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.Because a significant amount of U.S. currency contains traces ofcocaineand 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.In 1994, theUnited StatesCourt of Appeals, Ninth Circuit, held in the case ofUnited 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.

Paper money collecting as a hobby

Main article:Notaphily

Banknote collecting, ornotaphily,is a slowly growing area ofnumismatics.Although generally not as widespread as coin andstamp 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.The most valuable banknote is the$1000 billissued in 1890 that was sold at an auction for $2,255,000.

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,eBayhas surpassed auctions in terms of highest volume of sales of banknotes.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.

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.

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

• Banknote counter
• J. S. G. Boggs
• Contaminated currency
• Hell money
• Hybrid paper-polymer banknote
• Intaglio
• List of motifs on banknotes
• List of people on banknotes
• Money creation
• Postal currency
• Seigniorage
• Trevett v. Weeden
• United States Note
• Used note

Bibliography

• Atack, Jeremy; Passell, Peter (1994).A New Economic View of American History.New York: W.W. Norton and Co.ISBN978-0-393-96315-1.
• Bowman, John S. (2000).Columbia Chronologies of Asian History and Culture.New York: Columbia University Press.ISBN978-0-2311-1004-4.
• Ebrey; Walthall; Palais (2006).East Asia: A Cultural, Social, and Political History.Boston: Houghton Mifflin Company.ISBN978-0-6181-3384-0.
• Gernet, Jacques (1962).Daily Life in China on the Eve of the Mongol Invasion, 1250–1276.Stanford University Press.ISBN978-0-8047-0720-6.
• Needham, Joseph (1986).Science and Civilisation in China: Volume 5, Part 1.Cambridge University Press.ISBN978-0-5218-7566-0.
• Mockford, Jack (2014)."They are Exactly as Banknotes are": Perceptions and Technologies of Bank Note Forgery During the Bank Restriction Period, 1797–1821(PDF)(PhD). University of Hertfordshire.

External links

• Counterfeit money was a major problem in the 1850s – Pantagraph(Bloomington, Illinois newspaper)