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The Origins of Currency Transfer - Yee Kok Siong

The history of money is in practice the history of currency transfers. Ever since humankind has curbed the stage of paying in kind by inventing the currency, have money transfers of all kinds developed. Large sums of money are rarely moving physically between countries in today's world for currency transfers are now a routine and electronic transactions take seconds to be executed.

The first coin-based currencies appeared around 2000 BC but the metal-based currencies did not become widespread before the seventh century BC. China introduced the paper currency around 806 AD and it was a kind of a revolution in the then-financial world; yet many centuries had to pass before the paper currency acquired its present status of a common medium of exchange. Before paper money came to being, one would have to carry bags full of gold or other metal to conduct an exchange of any kind but later on governments started printing paper money and tie them to pre-stored precious metals. In fact, this development gave birth to the modern day foreign currency exchange and transfers.

On the other hand, during the medieval Crusades, when Europe was not familiar with the paper money, the then bankers provided crusaders and pilgrims with handwritten papers in exchange for gold or other coin currency deposited with them. Arriving in the Holy Land, a stranger knocked on the door of a local banker and in exchange for the papers was able to receive an equal sum in the local currency. Genoa and Venetia, and later the Knight Templar were the main bankers of medieval Europe and provided safe and reliable currency transfer services.

Yee Kok Siong says that mechanisms of the gold backed currency transfers did not change significantly during the centuries to come until the "gold standard" (in which every banknote in circulation is backed by the same amount of gold) was abolished in 1944 as well as the introduction of the telegraphic money transfers a few decades earlier.

Recent technology developments forced major changes in the Forex market and the ways of conducting currency transfers. Telegrams, telephone calls and telexes are replaced by real time foreign currency exchange platforms based on computer technologies and high-speed digital data transfer lines. In fact, today's currency transfers hardly ever involve an exchange of paper money; banks and non-banking institutions exchange data about the money, but not the money itself.

We all know that money is just a record of one's personal wealth; hence, bankers and other financiers need not to physically possess your money but to keep an accurate record of your wealth to be able to exchange these records with other financiers. Modern currency transfers work this way and no one is exchanging bags of gold or sending money physically. Briefly, some 90 per cent of the modern world's wealth is present only in the computer files of banks; while a mere 10 per cent is in the form of actual money. The foreign currency exchange market and the currency transfers have leaped forward tremendously in just a few decades.

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