Legal tender is legal status given to an instrument like currency note that it can be used as medium of payment. For example, the Rs 2000 note involves a legal tender assured by the RBI for settling payments to that value.
Cheques or instruments like commercial bills can’t be used as legal tender money. Similarly, a virtual currency like Bitcoin is different from bank notes mainly because the Bitcoin is not a legal tender money.
When the government withdraws legal tender status to a currency denomination, it cannot be used for settling transactions.
