Federal Reserve Notes (also known as banknotes) are legal tender. The words “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE” appears on each note.
Federal Reserve Notes used to be backed by an equivalent amount of gold held by the U.S. Treasury. But in 1971, President Nixon took the country off the gold standard, creating a fiat currency. Now, Federal Reserve Notes are solely backed by the government’s declaration that it is legal tender in the United States.
Federal Reserve Notes are often confused with Federal Reserve Bank Notes, which are issued, backed and redeemable by each individual member bank. Depending on the condition and the bank issuing them, some Federal Reserve Bank Notes can be quite valuable as they were phased out by the mid-1930s.