By the late Middle Ages and Renaissance period (15th-17th centuries), formal banking and the first paper currency emerged in Europe. The Medici family and other wealthy families in Florence run banks, hold deposits, issue credit, and pioneered the double entry bookkeeping method, laying the foundation for modern financial accounting. In the 16th century, Antwerp and Amsterdam became financial centers, with bills of exchange, marine insurance, and international credit supporting the expanding global trade. The establishment of public banks is a major breakthrough. The Amsterdam Bank, established in 1609, accepted various currencies and issued deposit certificates, creating a stable ledger currency or “bank currency” widely used in European trade. Merchants can directly transfer balances on bank accounts, foreshadowing modern checking accounts. In the 17th century, paper currency made its debut in Europe. In 1661, the Stockholm Bank in Sweden issued the first batch of public banknotes, supported by heavy copper deposits. Despite initial success, excessive issuance led to the bank’s collapse in 1664. In 1694, the Bank of England was established and began issuing receipts for deposits and government loans as banknotes. These early notes were representative currencies that could be exchanged for gold and silver. Over time, the Bank of England gained a monopoly on bill issuance, marking a crucial shift from a private to a centralized, state-owned monetary system. This period marked the rise of central banks and national currencies.
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