The pound is the official currency of Gibraltar. Gibraltar is an overseas territory of Great Britain located on the Mediterranean side of the southern tip of Spain. It has an area of only 6.8 square kilometres. Spain ceded Gibraltar to Britain in 1713, and it was originally an important naval base, but today, the territory is important for its tourism and shipping-based economy. While the U.K. is obliged to provide for defence, Gibraltar is a self-governing territory that retains the right to issue its own currency.
The Gibraltar pound is equivalent to the British pound sterling in nearly every way. The value of the currency is pegged on par to the pound sterling, and the two currencies are used interchangeably in Gibraltar. The Gibraltar pound consists of 100 pence and is issued by the Currency Board, a department of the local government that carries out many central banking functions.
The original currency of Gibraltar borrowed coins from other currencies, but in 1872, the Spanish real became the official currency. During the Spanish-American War, the value of the Spanish currency dropped, and Gibraltar adopted the pound sterling in 1898. British pound sterling notes were used until the first Gibraltar pound banknotes were issued in 1927. However, coins were not issued in Gibraltar pounds until 1988, 17 years after the currency was decimalised. The official authority allowing Gibraltar to issue and maintain its own banknotes did not come until 1934, five years after banknotes had already been printed. The Currency Notes Act of 1934 gives Gibraltar the power to issue banknotes backed by equal pound sterling reserves.
The first banknotes issued in Gibraltar pounds were in denominations of 2 shillings, 10 shillings, £1, £5 and £50. By 1975, the shilling notes had been discontinued, and £10-notes and £20-notes were introduced. In May 2011, a new series of banknotes was put into circulation. The denominations of the new series are 5, 20 and 100 pounds. Coins were first minted for Gibraltar in 1988. The same blanks used for striking pound sterling coins are used for Gibraltar coins, making identical denominations of the coins also identical in size, weight and metal composition. Coins currently in circulation are in lower of denominations of 1, 2, 5, 10, 20 and 50 pence and higher denominations of 1 pound and 5 pounds.