The history of Philippine money covers currency in use before the Hispanic era with gold Piloncitos and other commodities in circulation, as well as the adoption of the peso during the Hispanic era and afterwards.
The Philippine peso is ultimately derived from the Spanish peso or pieces of eight brought over in large quantities by the Manila galleons of the 16th to 19th centuries. From the same Spanish peso or dollar is derived the various pesos of Latin America, the dollars of the US and Hong Kong, as well as the Chinese yuan and the Japanese yen.
History
Long before the Spaniards came to the Philippines in 1521, the Filipinos had established trade relations with neighboring lands like China, Java, Borneo, Thailand and other settlements. Barter was a system of trading commonly practiced throughout the world and adopted by the Philippines. The inconvenience of the barter system led to the adoption of a specific medium of exchange – the cowry shells. Cowries produced in gold, jade, quartz and wood became the most common and acceptable form of money through multiple centuries.
The Philippines is naturally rich in gold, making possible the availability of local gold coinage called piloncitos. The original silver currency unit was the rupee or rupiah (known locally as salapi), brought over by trade with India and Indonesia. The salapi continued under Spanish rule as a teston worth four reales or half a Spanish peso.
Early Philippine history (c. 900 AD–1565)
Piloncitos
Piloncitos were used in Tondo, Namayan and Rajahnate of Butuan in present-day Philippines. Piloncitos are tiny engraved bead-like gold bits unearthed in the Philippines. They are the first recognized coinage in the Philippines circulated between the 9th and 12th centuries. They emerged when increasing trade made barter inconvenient.
Piloncitos are so small—some are of the size of a corn kernel—and weigh from of fine gold. Large Piloncitos weigh almost 1 mace, or 1/10th of a tael. Piloncitos have been excavated from Mandaluyong, Bataan, the banks of the Pasig River, Batangas, Marinduque, Samar, Leyte and some areas in Mindanao. They have been found in large numbers in Indonesian archeological sites leading to questions of origin. That gold was mined and worked here is evidenced by multiple Spanish accounts, like one in 1586 that said:
Barter rings
The early Filipinos also traded along with the Barter rings, which is gold ring-like ingots. These barter rings are bigger than a doughnut in size and are made of nearly pure gold.
Imported Chinese cash
A relatively unknown chapter of Philippine numismatics is the importation and usage of bronze Chinese cash in Philippine markets. Like other Southeast Asian ports, the Chinese coinage flooded trading ports in the Philippine Islands starting as early as the 13th century and continuing into the Qing Dynasty period.
One issue of coinage, the Wanli Tongbao, which was issued during the Wanli period of the Ming Dynasty, frequently bear post-mint chopmarks on the rims. These chopmarks have been attributed to Chinese merchants based in Manila around the late 16th or early 17th century, making the so-called Manila Chopmarks on the Wanli coins the earliest chopmarks known.
Spanish era (1565–1898)
The Spanish silver peso worth eight reales was first introduced by the Magellan expedition of 1521 and brought in large quantities by the Manila galleons after the 1565 conquest of the Philippines. The local salapi continued under Spanish rule as a half-peso coin. Additionally, Spanish gold onzas or eight-escudo coins were also introduced with identical weight to the Spanish dollar but valued at 16 silver pesos.
Silver Cobs and Columnarios
The earliest silver coins brought in by the galleons from Mexico and other Spanish colonies were in the form of roughly-cut cobs or macuquinas. These coins usually bore a cross on one side and the Spanish royal coat-of-arms on the other. Locals called these crudely made coins "hilis-kalamay" due to its resemblance to flattened rice cakes. These were replaced starting 1726 by machine-minted coins called Columnarios (pillar dollars) or dos mundos (two worlds) containing of 0.917 fine silver (revised to 0.903 fine in 1771).
These pillar dollars circulated extensively not only in the Philippines but all over the world in the 18th and 19th centuries due to its beauty of design, consistency of weight and fineness, universal recognition among merchants worldwide, and a serrated edge which prevented the clipping away of the precious metal. From the same Spanish peso or dollar is derived the various pesos of Latin America, the dollars of the US and Hong Kong, as well as the Chinese yuan and the Japanese yen.
Fractional currency and Cuartos
Silver coins were minted in denominations of 8 real () and 4, 2, 1 and real. Gold coins came in denominations of 8 escudos () and 4, 2, 1 and escudos. Small change was also made by cutting a whole coin, most commonly into eight wedges each worth one Spanish real.
Locally produced crude copper or bronze coins called cuartos or barrillas were also struck in the Philippines by order of the Spanish government. From this came the Filipino words “kwarta” (synonymous to money in general) and “barya” (small change). In 1837, an order was issued that 20 such cuartos be counted as one real (hence, 160 cuartos to a peso).
The discontinuation in the 19th century of officially minted copper cuartos was alleviated in part by counterfeit two-cuarto coins (worth 80 to a peso) made by Igorot copper miners in the Cordilleras and accepted in circulation by the rest of the country.
Stamped Philippine Currency
In the early part of the 19th century, most of the Spanish colonies in Central and South America revolted and declared independence from Spain. They issued silver coins bearing revolutionary slogans and symbols which reached the Philippines. The Spanish government officials in the islands were fearful that the seditious markings would incite Filipinos to rebellion. Thus they removed the inscriptions by counter stamping the coins with the word F7 or YII.
A currency system derived from coins imported from Spain, China and neighboring countries was fraught with various difficulties. Money came in different coinages, and fractional currency in addition to the real and the cuarto also existed. Peso coins with Spanish or Mexican designs are also easily imported and exported overseas, occasionally emptying government and private coffers. Money has nearly always been scarce in Manila, and when it was abundant it was shipped to the provinces. An 1857 decree requiring the keeping of accounts in pesos and centimos (worth 1/100 of a peso) was of little help to the situation given the existence of copper cuartos worth 160 to a peso.
Philippine Gold / Silver Bimetallic Standard in the 19th century
The Spanish gold onza (or 8-escudo coin) was of identical weight to the Spanish dollar but was officially valued at 16 silver pesos, thus putting the peso on a bimetallic standard with a gold/silver ratio of 16. Its divergence with the value of gold in international trade featured prominently in the continued monetary crises of the 19th century.
The California gold rush of 1848-1855 meant the gold onza, officially valued at 16 pesos, fetched only about 15 pesos internationally, and it in fact suffered as much as a 33% discount when paid to Chinese merchants who consistently count in silver pesos. As the Spanish government continued to receive these gold onzas as 16 pesos, there eventually came a time when silver pesos became scarce and only gold 16-peso coins remained in circulation.
In order to remedy this damage in the monetary situation, Queen Isabella II issued a decree in 1857 ordering the founding of the Casa de Moneda de Manila in the Philippines in order to coin gold 1-, 2- and 4-peso coins according to Spanish standards (the 4-peso coin being of 0.875 gold). The first gold coins were minted in 1861. In the same year, a royal decree ordered the minting of 50-, 20- and 10-centimo silver coins out of Latin American coins also according to Spanish standards (with 100 centimos containing of 0.900 silver). The price of silver has since gone down and the first silver coins were minted in 1864.
The relative abundance of gold in the Philippines then came to an end with the adoption of the British gold standard now American Gold Standard in most of Europe after 1871 and the subsequent climb in the international gold/silver ratio above 16. It was further aggravated by an 1876 decree confirming the Mexican peso as legal tender in the Philippines and exchangeable with the gold onza for 16 pesos. The climb in the gold onza's overseas value above 16 pesos soon made importing Mexican dollars in exchange for gold coins a profitable venture. While the Governor General attempted in 1877 to stem the outflow of gold by limiting the legal tender status of Mexican silver, by 1884 gold coin had entirely disappeared.
The 19th century therefore ended with the Philippine peso still officially on a bimetallic standard equal to either the silver Mexican peso (weighing of 0.903 fine or of XAG) or 1/16th the gold onza (weighing of 0.875 fine or XAU). The gold peso, however, has since increased in value to approx. two silver pesos. Furthermore, the fineness of Philippine fractional silver coins was reduced from 0.900 to 0.835 and worsened the quality of the local currency, and the introduction of Alfonsino silver coins in 1897 did little to improve the peso's exchange value. Such Mexican and Spanish-Filipino coins remained in circulation until they were demonetized after the introduction of the new US-Philippine peso in 1903.
Peso Fuerte Banknotes
The first paper money circulated in the Philippines was the Philippine peso fuerte issued in 1851 by the country's first bank, the Banco Español-Filipino. Being bimetallic and convertible to either silver pesos or gold onzas, its volume of 1,800,000 pesos was small relative to about 40,000,000 silver pesos in circulation at the end of the 19th century.
Sulu coins The Sultanate of Sulu in the southernmost islands engaged actively in barter trade with the Arabs, Han Chinese, Bornean, Moluccan, and British traders. The Sultans issued coins of their own as early as the 5th century. Coins of Sultan Azimud Din that exist today are of base metal Tin, Silver and alloy bearing Arabic inscriptions and dated 1148 AH corresponding to the year 1735 in the Christian era.
First Philippine Republic (Revolutionary period 1898–1899)
The Philippine Republic of 1898 under General Emilio Aguinaldo issued currency backed by the country's natural resources. Two types of two-centavo copper coins were struck at the Malolos arsenal and one and two peso paper notes hand signed by Pedro Paterno, Mariano Limjap and Telesforo Chuidian were printed and freely circulated. These were withdrawn from circulation and declared illegal currency after the surrender of General Aguinaldo to the Americans.
American colonial period (1901–1946)
After the United States took control of the Philippines, the United States Congress passed the Philippine Coinage Act of 1903, established the unit of currency to be a theoretical gold peso (not coined) consisting of 12.9 grains of gold 0.900 fine (0.0241875 XAU), equivalent to ₱2,640 as of December 22, 2010.0.0241875 XAU = 2,640 PHP, xe.com. This unit was equivalent to exactly half the value of a U.S. dollar. Its peg to gold was maintained until the gold content of the US dollar was reduced in 1934. Its peg of ₱2 to the US dollar was maintained until independence in 1946.