The colon is the official currency of Costa Rica. It was introduced in 1896 as a replacement for the Costa Rican peso. The colon is a decimal currency that is divided into 100 centimos. The sole banking authority in the country is the Central Bank of Costa Rica. The Central Bank was established in 1950 as a reorganization of the National Bank of Costa Rica, which had been the monetary authority since 1936. The Central Bank was seen as necessary after the 1948 decree that nationalized all private banks accepting deposits from consumers. The Central Bank was also set up with the ability to accept a large role in the overall economy of the country. The main functions of the Central Bank of Costa Rica are to maintain the value of the colon on the foreign exchange, administrate the national reserves, act as the state banker, set credit and exchange policy and to regulate of all financial institutions in the country.
When the colon was introduced in 1896, it was on par with the old Costa Rican peso. The first coins were minted of gold in denominations of 2, 5, 10 and 20 colons. Silver and cupronickel coins were introduced later. Coins before 1936 were directly issued by the government. From 1936 to 1948, coins were issued by the National Bank, and after 1951, the Central Bank took over responsibility for issuing coins. Current coin denominations include 1, 5, 10, 25 and 50 centimos. Colon-denominated coins include 1, 2, 5, 10, 25, 50, 100 and 500-colon coins.
Banknotes in Costa Rican colons were first issued by private banks and then by the government, beginning in 1890. The first banknotes currently considered legal tender were printed in 1950 in denominations of 5, 10, 20, 50 and 100 colons. Since the original printing, several other denominations were added. The first of these were the 2-colon, 500-colon and 1000-colon notes. These were followed in the 1990s by 2000, 5000 and 10,000-colon notes.
The value of the colon has long been set on a crawling peg system against the U.S. dollar. The colon devalued at a rate of 3.294 CRC per USD per month until 2006. At that time, due to the perception that the colon had been devalued on the foreign exchange, it was allowed to float within a prescribed range.