Hayek put forward the theory of denationalization of money in 1976, and suggested that private banks should be allowed to issue money to restrict the issuance of governments.However, the opponents argued that the private note-issuing banks pursuing private profits would inevitably issue money unlimitedly and finally lead to inflation.This paper analyzes the effect of banks' reputation on note issuance by unifying both the issuance and credit of banks.It demonstrates that the reputation mechanism could effectively restraint note-issuing banks in competitive issuing environment, and the banks in pursuit ofsustainable long-term profits would tend to issue money in moderate rate to maintain its reputation.Furthermore, it employs the survival history of banks or the membership of Shanghai banking association to measure reputation and makes an empirical study to support the hypothesis of goodwill capital by using the micro data of 34 note-issuing banks and 150 banks during the silver outflow in 1930s.It finds that the banks with good reputation do issue money more soundly, and reputation brings the banks various advantages in business such as more paid-in capital, surplus accumulation and deposits, leading to bigger credit scale of banks with good reputation and profits at higher level; note-issuing banks do issue money more soundly actually owing to long-term profits.According to historical experience of competitive issuance of banks in Republican China, this paper provides micro evidence for the theory of denationalization of money put forward by Hayek and some implications for current monetary policy rule and RMB internationalization.