Stockholms Banco Issues Europe’s First Banknotes

A banknote represents a specialized form of paper currency distributed by a bank and payable to the bearer on demand. Historically, such notes were issued directly by commercial financial houses rather than state authorities. These institutions were legally obligated to redeem their notes for legal tender, typically gold or silver coin, whenever an individual presented them to the originating bank cashier. Because the notes depended upon the reputation and reserves of the specific issuer, they generally traded at face value only within the immediate commercial market served by that banking firm.

Europe's first true banknotes appeared in Sweden. Johan Palmstruch founded Stockholms Banco, Sweden's first bank, in the 1650s under a state charter, and in 1661 it issued what the Riksbank describes as the first real banknotes in Europe. Sweden's copper standard explains the timing: to support the price of copper, the state minted huge copper plate coins, the largest weighing 19.7 kilograms, and their bulk encouraged owners to deposit them with banks in return for paper. Palmstruch's certificates became true banknotes when he stopped matching the notes issued to the cash deposited, trusting that not every holder would ask for repayment at once. The notes were a great success, but the bank failed, and in 1668 the bank now known as Sveriges Riksbank, the world's oldest central bank, was founded from its ruins.