What is the Difference Between Currency Note and Bank Note?
Currency Note and Bank Note
Generally, these terms are used interchangeably. However, there are some subtle differences that may cause confusion.
First, a banknote is a promissory note issued by a central bank, guaranteeing payment on demand. A currency note, on the other hand, is a bill or paper money released by the nation’s monetary authority.
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Historically, coins and bills represented physical assets in barter systems; in this sense, they were representative of the value of the goods and services they contained. Initially, coins were made of gold and silver. But as these metals were gradually replaced by paper money, they became pure fiat money.
While coins are still used to negotiate trades, banknotes have become the main form of national currencies. They are produced in different formats, such as paper or polymer, and have a lower cost to issue, especially for larger denominations.
What is the Difference Between Currency Note and Bank Note?
In the United States, for example, the Federal Reserve notes are the primary banknotes in circulation, while banknotes issued by banks in other countries are known as treasury notes. In some countries, such as India, commercial banks issue their own banknotes.
Another key distinction is that coins can be weighed and examined for authenticity. But banknotes have a cost of acceptance, a process that involves checking security features and confirming the acceptability of the issuing bank.
The origination point of a note is sometimes obvious; a $1 or $2 bill typically contains a circle with a letter between A-L and a number from 1-12 that indicates the branch it originated from (e.g. G7, indicating the note originated at the Federal Reserve Bank of Chicago).
During World War II, when the United States government opted to go off the gold standard, banknotes were no longer backed by precious metals. Instead, American banknotes became a type of fiat money that is backed by good faith rather than a valuable asset.
There are also differences in the appearance of currency and banknotes, with banknotes usually being larger and more colorful than coins. They have a front and back (obverse and reverse), with the obverse of the note showing the image of the issuing authority, and the reverse of the note displaying the face value.
In addition to the appearance, banknotes may be marked with an ink coding system that helps identify them. These include numbers that are unique for the country in which they were printed, and a cross-reference that tells you which chapter to look for the note in (e.g. Burma or Ceylon).
As with other types of money, banknotes may be reissued, either on their own or by their underlying currency (e.g. a new series of US notes replacing the previous ones). In this way, they may continue to play a role in the monetary system of the country where they are reissued.
The issuer of a note is generally the central bank or treasury of the country in which it was issued. However, there are exceptions to this rule. In the United Kingdom, for instance, certain commercial banks in Scotland and Northern Ireland continue to issue their own banknotes, even though these are not legal tender anywhere else.