Coin Currency
Coin currency has been used throughout history as a medium of exchange. Until the development of paper money in medieval Europe and China and bills of exchange in modern times, metal coins constituted the primary form of cash in commercial transactions. They were minted in the earliest days as tokens with intrinsic value backed by the precious metals they contained.
Because they carried a substantial amount of symbolic value, coins were prized and hoarded. They were also widely buried, and discoveries of their contents in later ages provide important clues about the social and economic conditions that surrounded them in their time of circulation. Coins can serve as primary evidence in the study of the development of monetary systems and trade patterns, for example illustrating the extent of cities’ trading networks and the political boundaries of nations and regions.
Most coins are circular in shape, although they can be found in a wide variety of other shapes. The side of a coin bearing an image of a monarch or other authority is called the obverse (colloquially, heads); the other, carrying various types of information, is the reverse (tails). In addition to the date of minting shown on most coins, the denomination, or face value, and the metal content are often printed on the back.
In the earliest days of coinage, governments often faced a shortage of the precious metals used to make their coins, which limited how many they could produce. To remedy this, they would sometimes reduce the precious metal content of a coin by replacing some of it with base metals such as copper or nickel, which allowed them to mint more coins than they otherwise could. This practice is known as debasement. It may have been done to improve a coin’s durability, or to make it more useful in commercial transactions by making it harder to wear down. It was often accompanied by price inflation, as the metal value of the coins increased faster than their face values.
Today, coins are almost exclusively made of base metals and carry only their face value, which is based on the laws of a particular country rather than its precious metal content. Nevertheless, coins continue to be an indispensable component of global commerce. Their use is facilitated by the existence of an extensive network of bank branches, credit unions, and other financial institutions that offer services to exchange coins for cash. Many of these organizations also have coin-counting machines that allow customers to exchange their spare change for gift cards or donate them to charities.
When these institutions order currency from their Federal Reserve Bank, it is supplied in a mix of new and recirculated currency and coins. For more information, see the Currency and Coin Frequently Asked Questions page on FRB Services and the Currency and Coin Frequently Asked Questions video (Off-site) on the Board’s website.