CandleFocus Glossary Editor
Currency is a form of payment that functions as a medium of exchange accepted by individuals, businesses, and governments. Linked to finances and monetary transactions, currency plays a vital role in the global economy. It helps facilitate international trade, investment, and the movement of goods across the world.
Currency is issued by a government and circulated within its jurisdiction. It is the only means of payment declared legal tender, recognized as a medium of exchange by decision of a governing body such as a national government or supranational entity. The value of any currency is constantly in flux and in relative terms with other currencies. Many countries accept U.S. dollars as payment.
It is also important to note that through the practice of dollarization, currency is often pegged to the U.S. dollar. Pegging curtails a currency’s value from too much volatility or uncontrolled depreciation. For example, a country with a weak or volatile economy might peg its currency to the U.S. dollar, because it is considered to be much more stable in value.
One of the most significant developments in currency in the 21st century has been the emergence of cryptocurrencies. Cryptocurrencies exist only electronically, unlike physical currency, and are created using sophisticated computer codes. Unencumbered by government control, these are exchanged on a distributed ledger, stored digitally and tracked by an anonymous network of computers. While these digital assets have moved past the realms of speculation and are increasingly being recognised as investments, they remain a highly volatile and unregulated form of currency.
Currency is a key factor in the global economy, and it works as the backbone of many money-related transactions. Governments must be able to demonstrate fiscal responsibility and sound economic management to ensure their currency remains a trusted and respected form of payment. With the advent of cryptocurrency, this role for governments has been challenged, and it is likely to continue to evolve as new forms of money come to the fore.
Currency is issued by a government and circulated within its jurisdiction. It is the only means of payment declared legal tender, recognized as a medium of exchange by decision of a governing body such as a national government or supranational entity. The value of any currency is constantly in flux and in relative terms with other currencies. Many countries accept U.S. dollars as payment.
It is also important to note that through the practice of dollarization, currency is often pegged to the U.S. dollar. Pegging curtails a currency’s value from too much volatility or uncontrolled depreciation. For example, a country with a weak or volatile economy might peg its currency to the U.S. dollar, because it is considered to be much more stable in value.
One of the most significant developments in currency in the 21st century has been the emergence of cryptocurrencies. Cryptocurrencies exist only electronically, unlike physical currency, and are created using sophisticated computer codes. Unencumbered by government control, these are exchanged on a distributed ledger, stored digitally and tracked by an anonymous network of computers. While these digital assets have moved past the realms of speculation and are increasingly being recognised as investments, they remain a highly volatile and unregulated form of currency.
Currency is a key factor in the global economy, and it works as the backbone of many money-related transactions. Governments must be able to demonstrate fiscal responsibility and sound economic management to ensure their currency remains a trusted and respected form of payment. With the advent of cryptocurrency, this role for governments has been challenged, and it is likely to continue to evolve as new forms of money come to the fore.