Ask anyone in the world what images you'd find on the average British coin and most people would give you the same response: the Queen's head. Other correct (though less obvious) answers might include a thistle, a portcullis, and a representation of the Roman goddess Britannia. But one answer you probably wouldn't expect to hear is "a unicorn". So how do you explain this?
Image: Royal Mint
Britain isn't widely considered the most whimsical nation in the world, so how did a unicorn—one of folklore's most whimsical creatures—end up on its currency?
The answer is a tale of political and cultural deference with origins so far in the past that at a certain point they can only be explained through mythology, legend and speculation. It's a bit like trying to build a Zelda chronology, only with much less helpful Wikipedia pages.
Before you check your pockets, we should point out that there isn't a unicorn on every pound coin—only those minted in 1983, 1993, 1998, 2003 and 2008. These coins, still in circulation today, all use a reverse design which depicts the Royal Coat of Arms in full: a Royal Shield of Arms along with its motto (Dieu et mon droit) and two heraldic supporters: a lion on one side and a unicorn on the other. Like this:
Image: Royal Mint
So that's where you can find a unicorn. But that doesn't explain why it's there in the first place.
As with many things about modern Britain, you could blame the Victorians. The coat of arms found on pound coins was officially adopted by Queen Victoria in 1837 and, in respect to Britain's most beloved and (thus far) longest-reigning monarch, it has remained in use ever since.
But she'd probably not be amused if we held her solely responsible, because the unicorn was already part of the Royal Arms when she assumed them. Before her reign, only the shield of arms changed from one monarch to the next. The heraldic supporters remained the same.
In fact, the first version of the arms that incorporated a lion and unicorn flanking the shield was created over 200 years before Queen Victoria was even born.
In 1603, a quirk of birthright meant that King James VI of Scotland inherited the thrones of England/Wales and Ireland from his cousin twice-removed, Elizabeth I. He became the first monarch to rule the three British kingdoms simultaneously, and to reflect the "Union of Crowns", the arms of the new King James I (of England) incorporated a unicorn facing the lion, replacing the Tudor's Welsh red dragon.
Sodacan (Creative Commons licence)
(As a head-scratching aside, although the crowns were said to have been unified, they were—politically speaking—two separate crowns held by one person. It wasn't until an act of Parliament officially united the two countries in 1707 that the English arms came to represent all of Britain, and Scotland still has its own special version with the lion and unicorn positions reversed.)
Tracing the history back even further, it was James IV of Scotland who definitively introduced the unicorn into Scotland's arms in the late 1400s, but the official origins of the association are lost to history. The first recorded example of the unicorn in the Scottish monarch's heraldry actually comes from the latter half of the 1300s, when the arms of Robert II (or possibly Robert III) were incorporated into a gateway at Rothesay Castle, including a pair of unicorn supporters.
Image: Wikimedia (Creative Commons licence)
In any case, the reason there's a unicorn on the pound coin is because—for the last 700 years, at least—the unicorn has been used in heraldry to represent Scotland. It's a revelation that arguably raises more questions than it answers.
After all, the Scottish national character doesn't traditionally lend itself to that level of kitsch. But let's be fair to the unicorn: it only seems that way because you're looking at unicorns through modern eyes. Far from being the magical and flamboyant creatures they're currently seen as, for most of history the unicorn was believed to be an extremely aggressive and fierce animal, one more than worthy of representing a warrior nation like Scotland.
For proof, you need only note that the royal arms typically depict the unicorn as chained, with a crown around its neck. A free unicorn was considered incredibly dangerous, and while the chains are occasionally interpreted as representing the fealty and subservience of Scotland to England, they actually appeared prior to the Union of Crowns. What they actually represent is the strength of the Scottish monarchy, that it could tame a beast which, famously, would rather die than be captured (for how else would you explain the lack of domesticated unicorns?).
And if all that hasn't convinced you that it makes perfect sense to have a fictional animal adorn money, just think of it as something of a tradition. England's flag commemorates a Turkish saint who plainly couldn't have done the thing he's most famous for, Wales' flag depicts the non-existent animal he definitely could not have killed, and the greatest King of Britain—King Arthur—probably didn't exist at all. If anything, a better question is how anything sensible ended up on the coins at all.