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HR 240, Legal Tender Act, February 25, 1862

Civil War spending caused a shortage of coins—the only legal tender at that time. With the Legal Tender Act of 1862 Congress revolutionized the U.S. monetary system by making paper notes legal tender and creating a national currency for the first time.

Records of the U.S. House of Representatives, National Archives and Records Administration

HR 240, Legal Tender Act, February 25, 1862

From Gold to Greenbacks

The 37th Congress (1861–1863) faced a financial crisis in 1862, as spiraling costs of war rapidly depleted the Union’s reserves of gold and silver coin, the only legal tender of the United States. After intense debate, Congress authorized the issuance of paper U.S. Notes (popularly called “greenbacks”), declaring them lawful money for all payments except interest on public debt and import duties. The Legal Tender Act, intended as an emergency measure, dramatically extended federal power and changed the nation’s monetary standard.