On the Standardization of Currency in Canada -

In a world that is becoming increasingly more globalized, it’s not difficult to overlook how essential standardized currencies are to the global economy. A standardized currency allows for international trade to take place, as it limits both complications and uncertainty. This wasn’t always the case, and the subsequent text will provide a brief history as to how the Canadian dollar became Canada’s standardized unit of currency.

Early Years (1600-1700s)

When Canada was just a colony in its infancy, the use of currency was beginning to feature prominently as a means to facilitate trade between regions. Bills of exchange, card money, private paper, and even coins were new phenomena of the time, but these early means of exchange were easily counterfeited. Barter was the most conventional practice for domestic transactions. Items such as beaver pelts, moose skins, and wheat were examples of common goods often used in barter.

Transition Period (1700-1870)

During this transition period, the Canadian dollar as we know it began to take shape. Throughout the eighteenth century and the beginning of the nineteenth century the British pound sterling was the official unit of account in British North America. Many other coins were used in trade, including coins from France, Spain, Portugal, and Mexico. However, each colony was allowed to establish a “rating” to foreign coins, denominating their value in British currency (pounds, shillings, and pence). The rating was largely based on the amount of gold or silver in the coins, but this led to very different exchange rates across colonies. For example, in the mid-eighteenth century, a Spanish silver dollar was worth 4 shillings and 6 pence in London, 5 shillings in Halifax, 6 shillings in New England, and 8 shillings in New York. [1]

The uncertainty surrounding currency valuation at the time was surely detrimental to the economy of the colonies. Trade was complicated and often uncertain due to the lack of standardization. In 1817, the Bank of Montreal began to issue bank notes denominated in dollars. These new bank notes grew in popularity, as trade with the United States was becoming increasingly popular. With the unification of Upper and Lower Canada in 1841, the progression towards a decimal-based currency system began, and was consummated in 1851. By 1854, provincial accounts could choose to denominate their accounts in dollars, or pounds, shillings, and pence. In 1857, this was amended so accounts were only kept in dollars.

The Uniform Currency Act (1871)

With the implementation of the Uniform Currency Act in 1871, the decimalization process was complete. The British currency system was discontinued and replaced with the Canadian currency denominated in dollars, cents, and mills (1/10 of a cent). It was the passing of this Act that led to the ubiquitous adoption of the Canadian dollar, “from sea unto sea”.