On 8 November 2016, Prime Minister Narendra Modi announced that the existing INR 500 and INR 1000 notes would no longer be accepted as legal tender in order to combat counterfeiting, tax evasion and the shadow economy. [27] The Reserve Bank of India has described a system whereby holders of such notes can either deposit them into their bank accounts for the full and unlimited value or exchange the notes for new ones, subject to a cap. [28] The Indian rupee was an official currency of other countries, including the Straits Settlements (present-day Singapore and parts of Malaysia), Kuwait, Bahrain, Qatar, and the Trucial States (present-day the United Arab Emirates). There are different forms of legal tender that are accepted in the United States. These include the Decimal Currency Act 1970, which regulated legal tender prior to the introduction of the euro and established provisions similar to those in UK law (all taken from earlier UK legislation), namely: coins over 10 pence have been legal tender for a payment not exceeding £10, Coins of up to 10 pence were legal tender for a payment not exceeding £5, and bronze coins were legal tender for a payment not exceeding 20 pence. Legal tender can be defined as the currency of a nation in the form of paper money and coins. Legal tender is considered valid for the payment of all financial obligations. Nationally recognized legal tender varies from country to country. At that time, a particular currency was not considered legal tender, although it could be used as a „legal cash reserve“ by national banking associations. Thus, the term „legal tender“ had a broader meaning than the term „legal tender“. Sometimes monetary issues such as commemorative coins or transfer slips may be issued that are not intended for public circulation, but are still legal tender. An example of such a currency is the Maundy currency. Some currency issuers, notably Scottish banks, issue special commemorative notes for normal circulation (although no Scottish or Northern Irish notes are legal tender in the United Kingdom).

In addition, some standard coins are minted on higher-value dies as „non-circulating“ versions of the coin, which collectors can purchase for an additional fee. These documents are nevertheless legal tender. Some countries issue precious metal coins on which a monetary value is indicated well below the value of the metal containing the coin: these coins are called „non-circulating legal tender“ or „NCLT“. In 1933, Congress amended the law so that all U.S. coins and currencies (including Federal Reserve notes), regardless of when they were issued, constitute „legal tender“ for all purposes. Federal and state courts have since repeatedly ruled that Federal Reserve notes are also legal money. Milam v. U.S., 524 F.2d 629 (9th Cir. 1974), is typical of federal and state court cases where Federal Reserve notes are considered „legal tender.“ In the Milam case, the U.S. Court of Appeals for the Ninth Circuit considered a verdict denied to a person who wanted to buy back a $50 Federal Reserve note for „legal money.“ The U.S. offered Milam $50 in Federal Reserve notes, but Milam rejected the notes, saying the „legal tender“ should be gold or silver.

The Ninth Circuit noted that this issue had been settled nearly a century earlier by the U.S. Supreme Court in Legal Tender (Juilliard v. Greenman), 110 U.S. 421 (1884), dismissed this request as frivolous and upheld the decision. Legal tender serves several purposes. By default, it is used by market participants to perform the functions of money in the economy: an indirect medium of exchange, a unit of account, a store of value, and a deferred payment standard. Proponents of legal tender laws argue that markets generally do not produce the optimal type, quality, and quantity of money, and that legal tender increases the usefulness of money as a means of reducing transaction costs. In particular, legal tender can allow flexibility in the money supply, and a single currency can eliminate the transaction costs associated with using multiple competing currencies.

The introduction of legal tender is a means of achieving a single currency. The term „legal tender“ comes from the Middle French tendre (verbal form), which means „to offer“. The Latin root is tender (stretching), and the meaning of tender as an offer is related to the etymology of the English word „extend“ (hold outwards). [5] The United States issues paper money and coins to pay for purchases, taxes, and debts. The Bank Note Issue Act of 1893 allowed the government to declare a bank`s right to issue legal tender. This allowed the government to make such a statement in support of the Bank of New Zealand when the bank ran into financial difficulties in 1895 that could have led to its collapse. The Gulf rupee, also known as the Persian Gulf rupee (XPGR), was introduced by the Indian government as a replacement for the Indian rupee for circulation exclusively outside the country with the Reserve Bank of India Amendment Act of May 1, 1959. This creation of a separate currency was an attempt to reduce the burden of gold smuggling on India`s foreign exchange reserves. Legal tender is a form of money that courts must recognize as a satisfactory payment for monetary debts. [1] Each jurisdiction determines what is legal tender, but it is essentially anything that extinguishes the debt when it is offered („offered“) to pay a debt. The creditor is not obliged to accept the payment offered, but the act of offering payment in legal tender releases the debt.

Demonetization is currently prohibited in the United States and the Coinage Act of 1965 applies to all U.S. coins and currencies, regardless of age. The closest historical equivalent in the United States, outside of Confederate silver, was from 1933 to 1974, when the government banned most private property of gold bullion, including gold coins held for non-numismatic purposes. Now, however, surviving gold coins from before 1933 are legal tender under the 1964 law. When the Iraqi Swiss dinar ceased to be legal tender in Iraq, it was still circulating in the northern Kurdish regions and had a stable market value for more than a decade despite the lack of state support. This example is often cited to show that the value of a currency is not derived solely from its legal status (but that this currency would not be legal tender). After the partition of India and Pakistan in 1947, the Pakistani rupee was created, initially with Indian coins and Indian banknotes simply stamped with the word „Pakistan“. New coins and banknotes were issued in 1948. The advantage of fiat money is that it gives central banks greater control over the economy because they can control the amount of money printed. Inflation can occur when a government creates too much fiat money and the money supply grows too quickly as a result. Governments that print too much money can cause hyperinflation.

Cryptocurrencies are not considered money (i.e. accepted for use) in most parts of the world because there is no legal tender. However, El Salvador was the first country in the world to accept Bitcoin as legal tender in June 2021.