The two ex-British colonies that now use dollars instead of pounds

Two ex-British colonies ditched the as their currency for one simple reason. The Pound had been the dominant international currency up until the 1940s but changes to the financial system and new trading treaties changed all that.

and dumped the British Pound and took up their own version of the dollar as it was much simpler to use and less violate, according YouTuber History Matters. Canada dropped the pound in 1841 and replaced it with its own currency – the Canadian dollar – which is still in circulation today.

Just before ditching it, Canada has been using the Canadian Pound, which was worth slightly less than the British one. According to the history channel, the reason for Canada changing its currency was two-fold.

Firstly, Canada wanted better trading relations with the major economy at its southern border: America. As trade increased with America, the idea of neighbours having a similar currency took hold.

Secondly, the dollar’s decimal system was must simpler to use. There are 100 cents to the dollar while the British Pound was far more complicated and not a decimal currency.

At the time, each Pound was made of 20 schillings, which was made up of 12 pennies. Pennies consisted of four farthings. That meant a single Pound was made up of 960 farthings or 240 pennies.

“The value of these sub-units was very volatile,” the YouTuber said. Despite dropping it, the Pound remained the main international currency.

When Britain became the first major economy to withdraw from the gold standard in 1931, it created what was known as the Sterling Area – a zone where former colonies pegged their currency to the Pound’s exchange rate. The Ottawa system, also known as the Imperial Preference System, then put tariffs on nations using a different currency.

Canada wasn’t a member of the Sterling Area but it was a member of the Imperial Preference System. Discussions on dumping the pound as a currency did not take place in Australia until after World War II.

According to the YouTuber, Britain had become bankrupted by the war which meant Australia and its former colonial masters were trading less and less goods. As a result, Australia turned to the , which was buying more Australian products.

In the 1950s, then Australian prime minister Sir Robert Menzies ordered a review into whether Australia wanted to use the Pound. As a member of the Sterling Area and therefore susceptible to tariffs under the Ottawa System, Australia eventually decided to ditch the Pound Sterling.

Britain’s share of the global economy had also been shrinking at the time Australia oupted out of the Pound Sterling. Favouring the British economy over an ever larger American one was punishing Australia’s economy, so it made sense to switch. The final reason has to do with identity.

Australia, like other former colonies, wanted to distance themselves from the old Imperial system. In 1966, Australia ditched the pound and took up the Australian Dollar.

“The lack of decimalisation made the Pound more prone to fluctuation, which affected ordinary people,” the YouTuber said. “There was also the acceptance that the United States was now the world’s dominant economy and now using the dollar would make trade with them much smoother.”