In public finance, a currency board is a mechanism by which a monetary authority is required to maintain a fixed exchange rate with a foreign currency by fully backing the commitment with foreign holdings, or reserves. This policy objective requires the conventional objectives of a central bank to be subordinated to the exchange rate target.

Although a currency board is a common (and simple) way of maintaining a fixed exchange rate, it is not the only way. Countries often keep exchange rates within a narrow band by regulating balance of payments through various capital controls, or though international agreements, among other methods. Thus, a rough peg may be maintained without a currency board.

In colonial administration, currency boards were popular because of the advantages of printing appropriate denominations for local conditions, and it also benefited the colony with the seigniorage revenue. The first such case was the Board of Commissioners of Currency of Mauritius, established in 1849. Other notable cases included the West African Currency Board (est. 1912), East African Currency Board (est. 1919), and successive boards serving the Straits Settlements then British Malaya. The Bank of England favored the establishment of currency boards as a way to ensure that British colonies would keep their reserves in sterling and place them in London.

However, after World War II many independent countries preferred to have central banks and independent currencies. British colonial-era currency boards only survive in the Falkland Islands (est. 1899) and Gibraltar (est. 1914).

Currency board arrangements experienced a revival of popularity in the late 20th century following negative experiences with inflation. Unlike in the colonial era, they were typically implemented by existing central banks whose mandate was correspondingly restricted.

The main qualities of an orthodox currency board are:

The currency board in question will no longer issue fiat money but instead will only issue one unit of local currency for each unit (or decided amount) of foreign currency it has in its vault (often a hard currency such as the U.S. dollar or the euro). The surplus on the balance of payments of that country is reflected by higher deposits local banks hold at the central bank as well as (initially) higher deposits of the (net) exporting firms at their local banks. The growth of the domestic money supply can now be coupled to the additional deposits of the banks at the central bank that equals additional hard foreign exchange reserves in the hands of the central bank.

The virtue of this system is that questions of currency stability no longer apply. The drawbacks are that the country no longer has the ability to set monetary policy according to other domestic considerations, and that the fixed exchange rate will, to a large extent, also fix a country's terms of trade, irrespective of economic differences between it and its trading partners. Typically, currency boards have advantages for small, open economies which would find independent monetary policy difficult to sustain. They can also form a credible commitment to low inflation.