# legal-tender

## Definition

The legally recognized form of payment that must be accepted for the settlement of debts, with different metals having different legal tender status in different contexts. Smith notes that originally, only the coin of the metal considered the standard measure of value could be used as legal tender, and that in England, gold was not considered legal tender for a long time after it was first coined, while copper is not currently legal tender except for small transactions.

## Source Chapter

Book 1, Chapter 5: "OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY."

## Context

Smith discusses legal tender while explaining the historical development of monetary systems and the different roles played by various metals. He notes that the distinction between standard and non-standard metals was originally more than nominal, but became largely nominal once the proportion between different metals was regulated by public law.

## Economic Domain

Regulation

## Smith's Original Wording

"Originally, in all countries, I believe, a legal tender of payment could be made only in the coin of that metal which was peculiarly considered as the standard or measure of value."

## Modern Interpretation

Legal tender represents the formal recognition of certain forms of money for debt settlement, establishing the official currency of a nation. In modern terms, this concept relates to monetary sovereignty, currency regulation, and the legal framework for financial transactions. It underlies modern discussions of monetary policy, currency competition, and the role of government in establishing and maintaining monetary systems.