Which institution issued the first successful government-backed paper currency in the American colonies in 1690?

Massachusetts Bay Colony issued the first successful government-backed paper currency in the American colonies in 1690.

The colony faced a shortage of coins after financing an expedition against French forces in Canada. To pay soldiers and settle public obligations, Massachusetts issued bills of credit that could circulate as money and later be accepted for taxes.

These notes were not banknotes issued by a modern commercial bank. They were government promises, supported by the colony’s ability to collect taxes. Their use became a model for other colonies, which also issued paper bills when coins were scarce.

Colonial paper money later became controversial because excessive issues could reduce its value. The Continental Congress’s paper currency during the American Revolution, known as Continental currency, suffered severe depreciation. That later episode is sometimes confused with Massachusetts’s earlier experiment.