The American army brought in a large amount of gold, but this did not remain in circulation long, as it was exported by the different business concerns, or hoarded.

United States silver money had a limited circulation during the early days of American occupation, but it passed at less than its true value.  An effort was made under the military administration to keep the ratio of exchange at two to one by the purchase from the public of all United States currency offered at that rate to the banks.

For a long time the banks refused to carry private accounts in United States currency, but when it was offered for deposit it was changed into Mexicans with a heavy charge for the transaction, and an account opened in Mexican currency to the credit of the depositor.  If the depositor afterward desired to get United States currency, he gave a check for it at the then existing rate of exchange.  Such conditions were intolerable, and the commission passed an act making it an offence to refuse to accept for deposit the currency of the sovereign power, but this did not remedy the fundamental difficulty.  There came a heavy slump in the price of silver.  The Insular government lost a very large sum because of the decrease in value of its silver coin.

Mr. Charles A. Conant had been brought from the United States to make a report on the feasibility of providing an American coinage for the islands.  He recommended that the unit of value should be a peso, equivalent to fifty cents United States currency.  Congress, by an act passed July 1, 1902, vested general authority over the coinage in the Philippine government, but the commission decided not to take action until more specific authority could be obtained from Congress, as the proposed reform was radical, and it was very important that the new currency should at the outset command the confidence so essential to its success.

After long discussion, Congress authorized, by an act passed March 2, 1903, a new currency system based on a theoretical peso of 12.9 grains of gold 900 fine, equivalent to one-half of a United States gold dollar.  The circulating medium was to be the Philippine silver peso, which was to be legal tender for all debts, public and private, and its value was to be maintained on a parity with the theoretical gold peso.  For this purpose the creation of a gold standard, or gold reserve fund, was provided for, and this fund was to be maintained and could be used for no other purpose.

Considerable difficulty was experienced in introducing the new currency into the islands.  The banks at first failed to give any assistance to the government.  The business men of Manila, and especially the Chinese, discounted the new Philippine peso, because it did not contain as much silver as did the Mexican dollar.  They were quickly brought to time, and given to understand where they stood if they discredited the currency of the country.

The Spanish Philippine coins and the Mexican coins in circulation were collected by the treasury and exported to the San Francisco mint, where they were reminted into new coins of the weight and fineness prescribed by law.