Legal Tender

In the United States, legal tender is any form of money that cannot be refused for payment of a debt. Creditors are required to accept legal tender from anyone wishing to settle a past due account. The Currency Act of 1965 required that the government accept these forms for payment of "public charges, taxes, and dues." The Act also changed the alloy combination for dimes and quarters. Copper was placed in the center of the coins because the actual weight of the silver was more than the value of the coin as legal tender.

At that time in the US there were also two forms of notes used as paper money, those being Federal Reserve notes and United States notes. The United States notes were cycled out of circulation beginning in 1971. They served no actual function that could not be duplicated by the Federal Reserve note, as both are a paper fiat currency tendered in value by the full faith and credit of the US economy.

It is important to understand that the legal payment acceptance requirement only applies to debt. Any business has the right to determine what they will accept as forms of payment for its particular product or service. An example would be renting an automobile. Credit cards are the only acceptable form of payment. Smaller types of businesses also have the authority to limit purchase options based on denominations of bills or coins, exampled by vending machines. Though various forms of money exist in any given economy, the legal requirement of acceptance is only partially applicable in some instances.

There are also laws in place to govern the acceptance of legal tender across the world, with each country having individual names for its currency structure. All forms of legal tender globally are calculated in relationship to the US dollar but are authorized by each nation's own form of central bank. Many nations have had multiple restructuring of monetary systems. For most, gold coinage was the primary form of exchange until the 20th century when fiat currency began to replace most hard monetary forms.

The future of fiat money and differing monetary systems may be in transition. One of the characteristics of this form of money is that the exchange currency can be changed at any point in time through a process known as remonetisation. This is what occurred in the Eurozone in January 2002. Although not a complete reissue of the national money supplies, the euro was developed as a two-sided coin. One side denotes the actual original jurisdiction and the other side authorizes the currency to be used uniformly across the Eurozone (for the most part). Small denomination coins are not always accepted and are often limited in amount when they are accepted.

US presidential campaigner Congressman Ron Paul argues that all kinds of money ought to be made legal tender so that each can compete against the other. In such a case, fiat (paper) currency would soon cease to be used, in his opinion, and currency backed by gold and silver would become the money standard as it has been throughout history.