Public and legal origin

The uniqueness of currency as a form of money consists in the fact that it hasn’t evolved from commodity relations and economic theories, but is designated by a State document. Its «parents» are not political economy and industrial relations, but public law — State public relations in the field of money circulation (fig. 13).

If in earlier times public relations would push forward certain commodities to be circulated as forms of money, then at present, with public relations developed to a higher level, the public delegates the function of defining money forms to the State (or, in some cases, the ruler himself would usurp this function) and it is the State (king, emperor, tsar, president and parliament) that define money forms on the grounds of a volitional decision.

It is the compulsion power of the State that strengthens currency. «..By Chinese laws of the 13th century, those who refused to accept imperial paper money were sentenced to death, in France the same offence was punished by 20 years of penal servitude, and according to English legislation, refusal to accept government banknotes was seen as State treason» ¹²¹

A revealing argument that proves the State-enforcement origin of currency is the treatment of money counterfeiting not only as a criminal, but also as a political offence. The struggle against money counterfeiting in the USA was initially led not by the police or the FBI, but the president’s personal secret security service¹²²

Because it is the State that issues currency, it is the State that creates additional legal norms of the public law, which are in force as well as the «usual» public law support applicable to banknotes and bills.¹²³

These additional legal norms include every trader’s duty to accept currency payments, as well as more strict prosecution measures against counterfeiters compared to swindlers who forge bills and banknotes of private banks.

Aristotle, as early as in his time, made the point that «money became money (nomisma) not through its internal character, but on the strength of the law (nomos), and it is within our power to change this situation and render it useless¹²⁴

The Federal Law «On currency regulation and currency control» (draft of the 29.12.1998) states the following:

1. "The currency of the Russian Federation":

а) Roubles in the form of Central Bank of the Russian Federation bank bills (banknotes) and coins, being in circulation, as well as being or having been recalled from circulation, but still liable to exchange;

б) сassets in roubles on accounts in banks and other credit institutions within the Russian Federation;

c) assets in roubles on accounts in banks and other credit institutions outside of the Russian Federation on the grounds of an agreement concluded by the Government of the Russian Federation and the Central Bank of the Russian Federation with appropriate foreign institutions about the use of Russian currency on the territory of the foreign state as a legitimate means of payment.

3. Foreign currency is:

а) monetary units such as banknotes, T-Notes, coins, being in circulation and acknowledged as the legitimate means of payment in the appropriate foreign state or group of states, as well as monetary units being or having been recalled from circulation, but still liable to exchange.

б) assets on bank accounts in monetary units of foreign states and international monetary or payment units».

As a rule, in most countries of the world national currency is defined as provided by law for circulation liabilities of the Central Bank (Treasury, Reserve System), endowed by the Government with the following properties:

• it is a legal means of circulation which has to be accepted on a compulsory basis as a means of payment for goods and services on the whole territory of a country;
• it is circulated as bearer liabilities without time-limit, which exist both in cash (banknotes and coins) and non-cash form (deposit money — assets on bank accounts);
• it is acknowledged as the sole means of tax settlement;
• Government has a monopoly on its emission.

In the legal sense, one may with good reason define modern currency as the two forms of money which act as the only acknowledged legitimate means of payment and the sole means of tax settlement:

• cash, or banknotes and coins of the Central Bank;
• non-cash, or deposit money.