Currency, the true meaning
Currency in the most specific sense is money in any form when used or circulated as a medium of exchange, especially banknotes and coins in circulation, and a more general definition is that currency is a monetary system (monetary units) commonly used, especially for the people of a nation. Under this definition, US dollars (US dollars), euro (€), Indian rupee (₹), Japanese yen (¥), and British pound (£) are examples of currencies. Currencies may act as stores of value and are traded between countries in the foreign exchange markets, which determine the relative values of different currencies. Currencies in this sense are determined by governments, and each type has limited acceptance limits.
Other definitions of the term “currency” appear in related synonymous articles: banknotes, coins, and money. This article uses the definition that focuses on the currency systems of countries.
One can categorize currencies into three monetary systems: paper money, commodity money, and representative money depending on what guarantees the value of the currency (the economy as a whole versus the government’s physical mineral reserves). Some coins function as legal tender in some political jurisdictions. Others are simply traded for their economic value.
Digital currency originated with the popularity of computers and the Internet. Whether digital fiat currencies will be successfully developed is questionable. Decentralized digital currencies, like cryptocurrencies, are not legal tender, strictly speaking, because they are not issued by a government monetary authority (although one of them, Bitcoin, has become legal tender in El Salvador). Numerous warnings issued by different countries point to the opportunities that cryptocurrencies create for illegal activities, such as money laundering and terrorism. In 2014, the IRS issued a statement explaining that virtual currency is treated as property for federal income tax purposes and providing examples of how applicable tax principles have been applied to transactions involving property on virtual currency.