The Reasons Behind Paper Money as Official Currency: An Overview from Economic, Social, and Cultural Perspectives

Noer Huda By Noer Huda
5 Min Read
Alasan Uang Kertas Jadi Pilihan: Sudut Pandang Ekonomi, Sosial, dan Budaya
Alasan Uang Kertas Jadi Pilihan: Sudut Pandang Ekonomi, Sosial, dan Budaya

jlk – Paper money stands as one of the most widely used forms of currency in the world today. Nearly every country has paper money as an official and recognized medium of exchange among its populace.

However, do you know the history and reasons behind the adoption of paper money? What are the advantages and disadvantages of paper money? How does paper money influence human behavior and culture? This article aims to answer these questions in an informative and engaging manner.

History of Paper Money

Paper money first emerged in China during the 10th century, under the Song Dynasty. Known as “jiaozi,” meaning “valuable paper,” it was a form of currency backed by gold and silver, exchangeable for various goods.

Compared to metal coins, paper money offered advantages such as being lighter, more portable, and easier to print. Its usage spread to various regions including Mongolia, Japan, Korea, and the Middle East.

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In Indonesia, paper money was introduced during the Dutch colonial period, initially using the gulden denomination. During the Japanese occupation, paper money was printed in the Indonesian language, with denominations in rupiah.

Following independence, the Indonesian government issued the Oeang Republik Indonesia (ORI) in 1946, laying the foundation for the national currency, the rupiah. Over time, Indonesian banknotes underwent changes in design, materials, and denominations, shaping the currency into what we recognize today.

Advantages of Paper Money

Paper money offers several advantages that contribute to its widespread acceptance:

  • Convenience: Paper money facilitates transactions of large denominations without the hassle of carrying heavy and cumbersome metal coins. It can be easily stored in various places such as wallets, books, or pockets, accelerating transaction processes by eliminating the need for counting numerous coins.
  • Ease of Storage: Paper money can be securely stored without involving third-party entities. It does not require electronic devices, internet connectivity, or electricity for use, making it accessible anytime, anywhere, without being reliant on external factors.
  • Ease of Counting: With clear and distinguishable denominations, paper money can be easily counted manually or using money-counting machines. It also features security features to differentiate between genuine and counterfeit notes.

Disadvantages of Paper Money

Despite its advantages, paper money also has its drawbacks:

  • Susceptibility to Counterfeiting: Paper money is a prime target for counterfeiters. Counterfeit currency can harm the economy by devaluing genuine money and disrupting monetary stability, leading to financial losses and criminal penalties.
  • Vulnerability to Damage: Paper money is prone to physical damage such as tearing, fading, or burning. Exposure to water, ink, or other chemicals can also cause damage, reducing the value and functionality of the currency.
  • Risk of Loss: Paper money can be lost due to negligence, theft, or accidents. Lost money can result in financial losses and transactional difficulties. Additionally, inflation, the general increase in prices of goods and services, can diminish the purchasing power of money.

Influence of Paper Money on Humans

Paper money serves not only as a medium of exchange but also as a symbol of value, status, and power. It can influence human behavior and culture, both positively and negatively:

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  • Encouraging Productivity and Creativity: Paper money can motivate individuals to work harder, smarter, and more innovatively. It enables the purchase of necessities, desires, savings, investments, and support for various social and humanitarian activities.
  • Fostering Greed and Injustice: However, paper money can also lead to problems if used unwisely and unfairly. It may fuel greed, corruption, fraud, and other crimes, as well as contribute to inequality, disparity, and poverty if not distributed equitably and proportionally.


Paper money, with its rich history, advantages, disadvantages, and societal impacts, reflects the evolving economic, social, and cultural dynamics of humanity.

Therefore, it is essential to use paper money wisely, fairly, and responsibly to derive benefits for oneself and others.

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