A paper currency recognition system used in a money exchange machine includes a LED type transmitter unit and a phototransistor type receiver unit controlled by a CPU. The receiver unit also includes an N-channel MOSFET. When a variation in the induction or signal current from the receiver unit is detected, the CPU controls the MOSFET to let a part of the induction current be shunt to the MOSFET, enabling the value of the induction current to be regulated to a readable range, and at the same time drives a control chip of the receiver unit to regulate the LED driving current, keeping the light intensity of the LED within a constant value.