based on the United States dollar. The statute provided that all government accounts would be kept in dollars and cents and established rates of exchange for the various coins then in circulation, at the rate of £1 equal to $4.85. The legislation repealed similar legislation enacted a few years earlier by the former colonies of Vancouver Island and British Columbia prior to their union. Prince Edward Island Prince Edward Island shifted to decimal currency in 1871, with the dollar replacing the Prince Edward Island pound. By statute, dollars and cents were adopted as the unit of account for the colonial government. The statute also set the exchange rate between sterling and the dollar at £1 equal to $4.8666. The colonial government was authorized to arrange for the printing of notes denominated in dollars, and the issuance of copper coins in cents. Province of Canada government notes Proposal for a central bank, 1841 In 1841, the first Governor General of the new Province of Canada, Lord Sydenham, proposed the creation of a provincial central bank. He suggested that the province establish a bank which would have exclusive power to issue bank notes. The first issue would be for £1million in provincial notes, but denominated in dollars. The notes would be backed by a combination of gold held by the province (25% of the value of the notes issued) and provincial government securities. The private banks would lose their power to issue bank notes. The proposal would have the double effect of providing a stable provincial currency, and also providing a guaranteed revenue source for the provincial government, estimated at £30,000 per year, from seigniorage. The proposal had the support of Francis Hincks, who chaired a parliamentary committee to study the proposal, but the proposal faced strong opposition. The private banks lobbied against it, fearing the loss of profits if their power to issue bank notes was eliminated. There were also fears expressed that the new bank would make credit tighter, making it harder to borrow money. A third concern was that it would place too much power in the hands of the government. Ultimately, the committee rejected the proposal. Province of Canada notes In the 1850s, there were several bank failures which shook confidence in the security of banknotes in the Province of Canada: first the Colonial Bank and the International Bank in 1859, followed soon afterwards by the collapse of