The dollar is the official currency of Bermuda. Like all dollar currencies, the Bermudian dollar is subdivided into 100 cents. The Bermudian dollar is mostly an internal currency. It is rarely traded on the international currency exchange.
Bermuda and other Caribbean colonies used Spanish dollars as their primary currency for nearly 400 years. However, when major Latin American nations began declaring independence from their European motherlands, Spanish dollars became increasingly rare. Bermuda was a colony of the United Kingdom in 1825, the year the U.K. declared that all colonies must adopt the pound sterling. This made the Spanish dollar convertible to pounds sterling at a rate of 1 dollar: 4 shillings and 4 pence. This conversion caused a discrepancy in actual values because the Spanish dollar was on the silver standard and pounds sterling were on a gold standard. To correct the mistake, the conversion rate was changed to $1: 4 shillings, 2 pence, but Bermuda and several other colonies in the area used was called the “maccaroni tradition.” The macaroni tradition allowed a British shilling to be used or traded at a value of a quarter-dollar.
In the 1870s a push was begun to introduce U.S. dollars to Bermuda, but most merchants were against this. The British were still having a difficult time ridding Bermuda of Spanish dollars. In 1882, the legal tender act demonetised Spanish silver and gold coins. Pounds sterling remained legal tender in Bermuda until 1970. The new Bermudian dollar was introduced in this year in order to enter decimalization, as most of the world had decimalized currency by this time. The Bermudian dollar was set at an on-par value with the U.S. dollar and maintained a pegged value to the U.S. dollar. The decision to base the Bermudian dollar on the U.S. dollar was largely due to most of the country’s reserves being in U.S. dollars.
All Bermudian currency is under the jurisdiction of the Bermuda Monetary Authority (BMA), which serves as the country’s national bank. The BMA was established in 1969 to oversee the implementation of the new Bermudian dollar. Today, the BMA is responsible for regulating financial institutions in Bermuda, issue currency, manage exchange transactions and to advise the government in financial decisions.