We tend to use these words interchangeably, and indeed their meanings are extremely close to one another. Nevertheless they are distinct. An approximate definition would be;
Money is a way of representing value. Currency is the physical form that money takes.
We can already begin to articulate some of the differences.
- Money is abstract, currency is physical. Money is just an idea; you cannot hold "money". Currency is a way of making the abstract concept a physical one. This means that
- Currency does not necessarily have value. For example, a cancelled credit card or a shredded dollar bill are worthless. Money has value independently of its currency.
- However, currency CAN have inherent value. Particularly if it is in the form of gold, silver, jewels, etc, i.e. they are the things of value themselves, not representations of them.
- Currency can be manipulated, money cannot. If money represents value, no one can simply decide that value exists; it must be created. However, currency can be created indefinitely; this is the problem of inflation, wherein there is more currency than actual value, and the currency loses its meaning and worth.
- Currency is almost always regulated by the government. A neighbor might "pay back" a favor with baked goods or a beer, but these objects are not currency, because their worth is not universally recognized or constant; the baked goods go bad, the beer goes flat.
- Currency is attached to a fixed numerical value. Over time, the actual value of 10 cents has changed; it might have purchased a meal 50 years ago. Nevertheless a dime will not purchase a meal today.
- Currency can be counterfeited. The counterfeit currency does not create counterfeit value, but only the appearance of value. Counterfeiting is in fact a form of inflation.
Money is given value by currency so the value of money is dictated by the strength of the currency.
For example, bitcoin is a virtual currency as it dictated purely on the rarity or difficulty or amount of bitcoins there are out there.
Money is merely value. Currencies are the different types of money. For example, 1 american dollar, a type of currency, is equal to 0.74 Euro. The money is the same, both amounts are the same value. Although, they are represented in different types of currency.