The standardisation of money in any form that is in use or circulation as a medium of exchange is referred to as a currency. This includes things like banknotes and coins. A currency is a system of money that is commonly used within a specific setting throughout time, particularly for people who live in a nation state. This is a more basic description of what a currency is. According to this definition, examples of (government-issued) fiat currencies include the British Pound Sterling (£), the euro (€), the Japanese yen (), and the United States dollar (US$). The foreign exchange markets are the places where countries come together to trade currencies with one another; these markets are also responsible for determining the relative values of the various currencies. In this sense, currencies are either selected by users or legislated by governments, and each kind has restricted borders of acceptability; for example, regulations governing legal tender can demand a certain unit of account for payments to government entities.
There are more meanings of the word "currency" that may be found in the articles that are synonymous with it, such as banknote, coin, and money. This article makes use of the term that places an emphasis on the monetary systems used by various nations.
Depending on what ensures the value of a currency (the economy as a whole as opposed to the government's physical metal reserves), currencies can be divided into one of three different monetary systems: fiat money, commodity money, or representative money. Each of these monetary systems has its own name. In certain regions or for particular transactions, such as making payments to a government agency or paying taxes, various currencies have the status of legal currency (fees, fines). Others are simply exchanged for other goods because of their economic worth.
The proliferation of personal computers and the Internet has led to the development of digital money. It is yet unclear whether or if government-issued digital bills and coins (like the digital renminbi used in China, for example) can be successfully produced and put into use in the near future. Bitcoin, the first cryptocurrency and the leader in terms of market capitalization, has a fixed supply and is thus purportedly deflationary. Other decentralised digital currencies, such as cryptocurrencies, are also distinct in that they are not issued by a sovereign monetary authority. There have been several warnings issued by a variety of governments, all of which stress the opportunity that cryptocurrencies present for illicit actions such as scamming, ransomware, money laundering, and terrorism. In 2014, the Internal Revenue Service (IRS) of the United States issued a statement clarifying that virtual currency is to be treated as property for the purposes of federal income taxation. The statement also provided examples of how long-standing tax principles that are applicable to transactions involving property can be applied to virtual currency.