Pound Sterling refers to the currency of the United Kingdom of Great Britain and Northern Ireland. This basic monetary unit has been divided according to the decimal system by 100 new pence since the year 1971 when they abandoned their millennium old subdivision system. This British pound is also the official currency and monetary unit of such far flung British dependencies and territories as Guernsey, Jersey, The Isle of Man, the South Sandwich Islands, South Georgia, Tristan da Cunha, the British Indian Ocean Territory, the British Pacific Ocean Territory, and the British Antarctic Territory.
The term Pound Sterling comes from around 775 A.D. At this time in Medieval England, the Saxon Kingdoms issued “sterlings” silver coins. Fully 240 such coins could be struck using a single pound of silver. Economic historians believe that the weight of these 240 sterlings likely equaled a troy pound. This is how bigger payments became referred to as pounds of sterlings. Finally this phrase became abbreviated to simply pounds sterling. Once the Norman Conquest era began, the pound was re-divided into 20 shillings as well as 240 pennies (pence). The explanation for where the symbols utilized even today for pound (£), shilling (s.), and penny (d.) came from is their medieval Latin names of libra, solidus, and denarius, respectively.
This system was confusing as it was not decimally based. This is why on the day of February 15th of 1971 the British redenominated pound sterling according to a decimalized system based on 100 new pence. They kept the long lasting symbol for pounds and added p to represent the new penny. What is interesting is that a range of other countries which do not utilize pound sterling similarly have currencies referred to as pounds.
There have been several times when the British pound served the role of commodity money. These banks notes at those times were backed up by either gold or silver obtainable and exchangeable from the Bank of England. Nowadays the pound sterling is only fiat currency, based on the national economy where it is utilized. Britain can take pride in the fact that its British pound remains the oldest currency in the world which is still in practical use and has always been continuously utilized since it arose.
There are an interesting range of local variants on the British pound sterling today. Guernsey and Jersey in the Channel Islands have their Guernsey pound and Jersey pound. The Isle of Man uses both the Manx pound and British pound as does Gibraltar utilize its Gibraltar pound alongside the British pound. Similarly, the Falkland Islands have their pound, while Saint Helena and Ascension Island, and Tristan da Cunha use the British pound alongside the Saint Helena pound.
Today the venerable Bank of England remains the national central bank responsible for pound sterling. It issues banknotes and coins and simultaneously regulates the private banks of Scotland and Northern Ireland in their issuing of pounds sterling banknotes. With the other jurisdictions that utilize the pound, their pounds issuance are not Bank of England regulated. Instead, the local governments utilize those notes from the Bank of England to back up their local pounds issues by permitting them to exchange the two at a one to one face value ratio in every case.
Pound sterling remains the fourth most heavily traded currency out of the entire foreign exchange universe around the globe. It trails only the U.S. dollar, the euro, and the Japanese yen, respectively. It also is a key component of the principle currencies in the IMF special drawing rights basket alongside those other three larger currencies and the Chinese Yuan. Sterling remains the third most inventoried reserve currency among global reserves after the dollar and the euro.