According to Barry Eichengreen, Greek and Roman coins were the first world currencies.
First European Banknotes (17th century) The first European banknotes were issued in 1661 by
Stockholms Banco. Founded by
Johan Palmstruch, it was a predecessor of Sweden's central bank
Sveriges Riksbank. As commercial activity and trade shifted northward in 17th century Europe, deposits at and notes issued by the
Bank of Amsterdam denominated in
Dutch guilders became the means of payment for much trade in the western world.
Spanish dollar (17th – 19th centuries) , 1739 In the 17th and 18th centuries, the use of silver
Spanish dollars or eight-real coins, also known as "pieces of eight", extended from the
Spanish territories in the Americas westwards to
Asia and eastwards to
Europe. This then formed the first worldwide currency. Spain's
political supremacy on the world stage, the importance of Spanish commercial routes across the
Atlantic and the
Pacific, and the coin's quality and purity of silver helped it become internationally accepted for about three centuries. It was legal tender in
Spain's Pacific territories of
Philippines,
Guam and
Micronesia, and later in
China and other
Southeast Asian countries, until the mid-19th century. In the
Americas it was legal tender in all of
South and Central America (except
Brazil) and in the
US and
Canada until the 19th century. The Spanish dollar was legal tender in the United States until the
Coinage Act of 1857. In Europe it was legal tender in the
Iberian Peninsula, as well as most of
Italy including
Milan, the
Kingdom of Naples, Sicily and
Sardinia; in the
Franche-Comté (
France); and in the
Spanish Netherlands. It was also used in other European states including the
Austrian
Habsburg territories. After
Mexican Independence in 1821, the Spanish dollar continued to be used in many parts of the Americas, together with the
Mexican Peso from the 1860s onward. The Mexican peso, the
US dollar, and the
Canadian dollar all trace their origins back to the Spanish dollar. This also includes the use of the caduceus sign ($), also known as the dollar sign.
Sterling Before 1944, the world reference currency was the
United Kingdom's
sterling. The transition between sterling and United States dollar and its impact for central banks was described recently.
U.S. dollar is pegged to the Chinese renminbi, Russian rouble and US dollar in a currency basket; instead of the renminbi it was pegged to the euro until December 2022. In the period following the
Bretton Woods Conference of 1944,
exchange rates around the world were
pegged to the
United States dollar, which could be exchanged for a fixed amount of gold. This reinforced the dominance of the US dollar as a global currency. Since the collapse of the
fixed exchange rate regime and the
gold standard and the institution of
floating exchange rates following the
Smithsonian Agreement in 1971, most currencies around the world have no longer been pegged to the United States dollar. However, as the United States has the world's largest economy, most international transactions continue to be conducted with the United States dollar, and it has remained the
de facto world currency. According to
Robert Gilpin in
Global Political Economy: Understanding the International Economic Order (2001): "Somewhere between 40 and 60 percent of international financial transactions are denominated in dollars. For decades the dollar has also been the world's principal reserve currency; in 1996, the dollar accounted for approximately two-thirds of the world's foreign exchange reserves", as compared to about one-quarter held in euros (see
Reserve Currency). Some of the world's currencies are still pegged to the dollar. Some countries, such as Ecuador, El Salvador, and Panama, have gone even further and eliminated their own currency (see
dollarization) in favor of the United States dollar. Only two serious challengers to the status of the United States dollar as a world currency have arisen. During the 1980s, the
Japanese yen became increasingly used as an international currency, but that usage diminished with the
Japanese recession in the 1990s. More recently, the euro has increasingly competed with the United States dollar in international finance.
Euro The
euro inherited its status as a major reserve currency from the
German mark (DM) and its contribution to official reserves has increased as banks seek to diversify their reserves and trade in the
eurozone expands. As with the dollar, some of the world's currencies are pegged against the euro. They are usually Eastern European currencies like the
Bosnia and Herzegovina convertible mark, plus several west African currencies like the
Cape Verdean escudo and the
CFA franc. Other European countries, while not being EU members, have adopted the euro due to currency unions with member states, or by unilaterally superseding their own currencies: Andorra, Monaco, Kosovo, Montenegro, San Marino, and Vatican City. , the euro surpassed the dollar in the combined value of cash in circulation. The value of euro notes in circulation has risen to more than €610
billion, equivalent to US$800 billion at the exchange rates at the time. A 2016 report by the
World Trade Organization shows that the world's energy, food and services trade are made 60% with US dollar and 40% by euro.
Recent proposals (21st century) Governmental • Enlargement (diversification) of the list of currencies used as reserve ones, based on agreed measures to promote the development of major regional financial centers. In this context, we should consider possible establishment of specific regional mechanisms which would contribute to reducing volatility of exchange rates of such reserve currencies. • Introduction of a supra-national reserve currency to be issued by international financial institutions. It seems appropriate to consider the role of IMF in this process and to review the feasibility of and the need for measures to ensure the recognition of SDRs as a "supra-reserve" currency by the whole world community." On 23 March 2009,
Zhou Xiaochuan, then-President of the
People's Bank of China, called for a replacement of the US dollar with a different standard using "creative reform of the existing international monetary system towards an international reserve currency," believing it would "significantly reduce the risks of a future crisis and enhance crisis management capability." Zhou suggested that the IMF's
special drawing rights (a currency basket then comprising dollars, euros,
sterling and yen) could serve as a super-sovereign reserve currency, saying that it would not be easily influenced by the policies of individual countries. Then-US President
Barack Obama, however, rejected China's call for a new global currency. He stated, "As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now." At the G8 summit in July 2009,
Dmitry Medvedev expressed Russia's desire for a new supranational reserve currency by showing off a coin minted with the words "
unity in diversity". The coin, an example of a future world currency, emphasized his call for creating a mix of regional currencies as a way to address the
2008 financial crisis. On 30 March 2009, at the second
South America-Arab League Summit in
Qatar, Venezuelan president
Hugo Chavez proposed the creation of a petro-currency. It would be backed by the huge oil reserves of oil-producing countries. Chavez's successor,
Nicolás Maduro, in 2018 announced the
Petro cryptocurrency, but it does not appear to be used as a
currency. ==Single world currency==