It is worth clarifying that the meaning of currency has not changed ever since its appearance, which can be traced back to the origins of human civilization. Whether it is the American or Canadian Dollar, Georgian Lari or Russia Ruble, the currency has always been something that represents wealth, a means to an end, etc. But what is more important – it has always been intertwined with the history and origins of money, which allowed people to exchange goods and services for centuries now.
Let’s go back to the origins of the Canadian dollar and US dollar. But first, let’s talk about the first paper money which originates in China. First of all, they were the ones who created paper using materials like linen, hemp, bamboo, or mulberry bark. Even though it was a common practice for Chinese to write credit notes on paper and deerskin, the first appearance of paper banknotes goes back to the Tang dynasty ruling in the 7th century. Notably, it happened in the region of the Valley of the Yellow River.
Later, once people realized that it is much easier to carry around paper banknotes, local Chinese authorities suggested that merchants exchange their metallic coins at the government treasury for paper notes. The use of paper currency became fully common and official a couple of centuries later – in 960 – during the ruling of the Song dynasty.
In Europe, the adoption of paper currencies came later. It was only the 1500s when banking institutions started giving receipts in exchange for currency deposits. In 1661, the government of Sweden officially became the first European government to issue its own banknotes.
Later, in 1684, the Bank of England started to permanently issue the paper currency as a part of its campaign during a war with France. Meanwhile, using paper notes in the U.S., which was then the colony of Great Britain, was not that common – people were still using forms of barter as trading tools, furs, or food with Native Americans. However, right after the U.S. war for independence from England in 1775, the continental congress started actively issuing paper currency already known as the “Continental”. Interestingly enough, the currency was denominated in units known as dollars.
The name “dollar” itself is believed to have originated from Germany, as the word “thaler” there was used to refer to coins minted in the 1500s in Saint Joachim’s valley in Bohemia. The issue with the dollar during that time was that because the government was not controlling how many notes were created, the currency quickly lost its value.
After only 10 years of independence, the congress announced the beginning of the issuance of the dollar by the U.S. government. In 1792, it was stated that the U.S. government started to manufacture and circulate coins. It wasn’t until 1861, the Civil War, that the government officially began printing U.S. dollar bills for the general flow of money and redemption upon demand.
At the same time, the history of the Canadian Dollar goes back with its roots to the 1850s when it was decided that Canada will adopt mostly adopt a decimal monetary system based on the U.S. dollar. The decision was mostly supported by the British North American provinces that were trading with the neighboring United States at that time. Therefore, it was simply easier and more practical back then.
Meanwhile, the imperial authorities in London still were more inclined towards the assimilation of sterling as the sole currency of the country. Therefore, it took some time before Canada fully introduced the Canadian Dollar as the country’s official currency.
Notably, in 1841, the Province of Canada became the first one that introduced a new system based on the Halifax rating, which meant that the Canadian Dollar equals four US Dollars. At the same time, one pound sterling was equal 1 pound, 4 shillings, and 4 Canadian pence.
However, to respond to British concerns, an act of the Parliament of the Province of Canada was introduced in 1853. Under this act, the gold standard was imposed on the Canadian currency for the very first time. It was based on both the British gold sovereign and the American gold eagle coins. The legal tender proclaimed that £1 = US$4.862⁄3. After that sterling coinage was made legal tender, all other silver coins were demonetized in Canada.
Even though the main global currencies have been existent for hundreds of years, it was only in the 17th century when the first foreign exchange market, or Forex, was created in Amsterdam. That happened after people started realizing that currencies are not just the means of obtaining items, but are also an asset themselves.
Today, currency represents the world’s largest market and accounts for around $5 trillion traded around the globe on a daily basis.