On May 22, 1946, the newly reorganized Bank of Taiwan began issuing Taiwan Dollars to replace the Taiwanese yen that were still circulating then in Taiwan. On June 15, 1949, the Taiwan Provincial Government reformed its currency system, exchanging Taiwan Dollars at the rate of one new dollar for 40,000 old dollars. Ever since then, the New Taiwan Dollar has been the currency used for transactions in Taiwan.
In response to economic development needs, the largest denomination of New Taiwan Dollar has been increased over the years from NT$5 to NT$2,000. The different designs of New Taiwan Dollar banknotes have reflected the changing times, and remain in the popular memory.
When Japan established the Bank of Taiwan Kabushiki-gaisha in 1899, it issued Taiwan's first-ever silver standard banknotes, in denominations of 1, 5, 10, and 50 yen. These were the first paper currency to circulate in Taiwan. In 1904, due to unstable prices for both silver and other goods, the Japanese government switched to the gold standard in Taiwan and began issuing banknotes backed by gold.
From 1914 forward, banknotes issued by the Bank of Taiwan Kabushiki-gaisha were printed with the phrase Taiwan Ginko ken, i.e. "banknote of the Bank of Taiwan." In addition to these so-called "Taiwanese yen," also circulating in Taiwan at that time were "Japanese yen" issued by the Bank of Japan. Just before Japan was defeated in war in 1945, the Japanese government shipped from Japan to Taiwan large volumes of Taiwanese yen as well as Japanese yen, denominated in JPY 1,000 and printed with the words "Bank of Taiwan" to indicate that these yen were restricted to circulating only in Taiwan. The resulting inflation was quite severe, and affected Taiwan's post-war economic recovery and reconstruction.
In order to maintain order in the post-war Taiwanese financial sector, which was still in a period of transition, the Ministry of Finance on October 31, 1945 issued the "Regulations Governing the Handling of Local Banknotes and Financial Institutions in Taiwan Province," which allowed the continued circulation of Taiwanese yen and prepared the way for Taiwan Dollars, which would enter into circulation the following year, to be exchanged for the Taiwanese yen at face value.
On May 22, 1946, Taiwan Dollars were first issued in denominations of TW$1, TW$5, and TW$10. Then in September of that year they were additionally issued in denominations of TW$50 and TW$100. In 1948, the Bank of Taiwan issued Taiwan Dollars in denominations of TW$100, TW$500, TW$1,000, and TW$10,000.
Within just a few years, due to severe inflation and urgent funding needs for a lot of different reconstruction projects, the total amount of Taiwan Dollars issued increased sharply, from the originally approved TW$3 billion to TW$527 billion by June  14, 1949, just before the Taiwan Provincial Government reformed its currency system. Also in circulation on the market at that time was a total of TW$1.2 trillion worth of fixed-amount sight promissory notes that were steadily depreciating. The need to issue New Taiwan Dollars was urgent.
To shore up public confidence in the New Taiwan Dollar, the government emphasized that it would be backed by a 100% reserve, limited the early issuance amount to NT$200 million, and pegged the New Taiwan Dollar to gold and the US Dollar, but the issuance amount was approaching the upper limit by December 1949. In July 1950 the government, in order to meet production funding needs, issued the "Taiwan Provincial Government Regulations Governing the Temporary Issuance of New Taiwan Dollars in Excess of Limits to Support Production." The Regulations increased the cap on total currency in circulation by NT$50 million.
Due to the resumption of US aid to the Republic of China (ROC) and the recovery of Taiwan's domestic production, Taiwan switched in 1954 to a flexible cap on the issuance of New Taiwan Dollars, which allowed the government to increase or decrease currency issuances on the basis of the amount of gold and foreign currency held by the Bank of Taiwan, the quantity of the Bank's warehouse receipts that could be exchanged for foreign currency, and the needs of business. After that, New Taiwan Dollars that were additionally issued to meet economic development needs continued to be backed by a 100% reserve, and continued to be regularly examined and announced, thus ensuring continued confidence in the currency.
On July 1, 1961, the Central Bank resumed operations in Taiwan, and around that same time the Executive Yuan issued the "Regulations Governing the Central Bank's Entrustment to the Bank of Taiwan of the Issuance of the New Taiwan Dollar in Taiwan by the Central Bank of the Republic of China." After the issuance of these Regulations, the Central Bank continued to entrust the issuance of NT Dollars to the Bank of Taiwan, but responsibility for printing, minting, and storage of NT Dollars was shifted to the Central Bank. Assets and liabilities arising from the issuance of NT Dollars belonged to the Central Bank, reserves against circulating currency were kept in custody by the Central Bank, and the costs of issuance were borne by the Central Bank.
In that same year the Bank started issuing newly designed NT$50 and NT$100 bills, whereas the largest denomination of the New Taiwan Dollar up to that time had been NT$10. The question of whether issuance of large bills would cause inflation became the subject of intense debate, but the domestic economy was growing steadily and exports were soaring. As a result, the financial order remained stable.
In 1998, the amount of NT Dollars in circulation topped NT$1 trillion for the first time, thus substantiating the fact that Taiwan's economy had been growing for a very long time. On January 26, 2000, the government adopted the "Regulations Governing the Issuance of New Taiwan Dollars by the Central Bank of China (Taiwan)," Article 2 of which provides that the currency of the ROC is the New Taiwan Dollar. From July of that same year, the government began issuing NT$1,000 notes with the Chinese term for "Central Bank" printed on them. From July 1, 2002, all old-version NT Dollar notes issued in 1999 or before were withdrawn from circulation by financial institutions acting on the government's behalf.
The NT Dollar from the very beginning was limited to circulating in Taiwan Province, but in light of practical necessity, the Ministry of Finance granted approval for it to circulate in Fujian Province (in Kinmen and Matsu) and Zhejiang Province (in the Dachen Islands). The notes were printed with a notation of where they were allowed to circulate. In addition, the NT Dollar was supplemented by subsidiary currencies to meet marketplace needs.
NT Dollar banknotes are printed by the Central Engraving and Printing Plant in a process that includes the following work stages: engraving of dies, making of printing plates, printing of banknotes, quality control, cutting, and packaging. The subsidiary currencies, meanwhile, are cast by the Central Mint. NT Dollar notes issued over the years have featured images of such subjects as Sun Yat-sen, Chiang Kai-shek, the head office of the Bank of Taiwan, the Presidential Office Building, and Chung Shan Hall. The images printed on NT Dollar notes in circulation have even more diverse themes and feature many printing techniques intended to defeat counterfeiters and ensure financial security, including relief printing, water marks, color-changeable ink, color shift security threads, hidden characters, optical variable devices, metallic ink, and portrait holograms.