Paper Money

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DEFINITION of 'Paper Money'

A country's official, paper currency that is circulated for transaction-related purposes. The printing of paper money is typically regulated by a country's central bank/treasury in order to keep the flow of money in line with monetary policy. Paper money tends to be updated with new versions that contain security features that seek to make it more difficult for counterfeiters to create illegal copies.

INVESTOPEDIA EXPLAINS 'Paper Money'

The first recorded use of paper money was believed to be in China during the 7th century A.D. as a means of reducing the need to carry heavy and cumbersome strings of metallic coins to conduct transactions. Similar to making a deposit at a modern bank, individuals would transfer their coins to a trustworthy party and then receive a note denoting how much money they had deposited. The note could then be redeemed for currency at a later date.

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