Abstract: In order to reduce the loss of an automatic coin machine for using a 1-Yuan false coin, a device is designed applying the eddy current theory. The device includes four modules: LC oscillating circuit, signal processing unit, microprocessor unit and External control circuit, which identifies false coins by the quantity of the circuit oscillation frequency changing. For overcoming temperature drift, component aging and environment disturbance, the algorithm adopts the technology of background frequency updating and Median filter. The experiment shows the device has the character of stability, reliability and high accuracy.