After careful deliberation by a committee, which was formed to consider the introduction of Cayman currency to the Islands, it was recommended that a local currency would be to the economic and political advantage of the Cayman Islands. This recommendation was accepted by Her Majesty's Government, in view of the rapid progress of the Cayman economy.
There was no opposition from the Bank of Jamaica, who indeed gave the Board valuable assistance throughout the transition period. Formal United Kingdom approval for the issue of a new and independent currency in the Cayman Islands was given in September 1970 and the Currency Committee was charged with the responsibility of introducing the currency and proposing the appropriate legislation.
The Cayman Islands Currency Board was created by the Currency Law of 1971 for the purpose of administering the physical issue and redemption of currency. The Law of 1971 allowed for an expansion in the Board's function over a period, which involved, inter alai, the development of an active investment policy, including the management of local assets, and perhaps ultimately the opening of accounts by the Board for the local commercial banks to establish a clearing system.
On May 1st 1972 the Cayman Islands Currency Board commenced operations with the new issue. By the end of June 1972 J$710,895 (Jamaican dollars) notes and coins had been redeemed. The method for withdrawal was very simple: all Jamaican currency held by and returned to the banks was paid over, at frequent intervals, to Barclays Bank International Limited, as Agent of the Board in exchange for an equivalent amount of Cayman currency. The Bank of Jamaica was informed of the amounts so withdrawn and the Currency Board's account with the Crown Agents in London was credited with the sterling counterpart on receipt of sterling value. It was agreed that the Bank of Jamaica would redeem at par, and the sterling counterpart of the currency issue received in London as exchange for the Jamaican currency formed the backing for the new currency. In order to ensure an adequate supply of currency during the changeover period, Jamaican notes and coins remained legal tender until 31 August 1972.
In mid-1972, the Cayman Islands Government signed an Agreement with World Coin Corporation for the issue of various sets of proof coins. By November 1972, two programmes were arranged and the coins were issued. The first programme was the Eight Coin Proof set and the second programme marked the silver wedding anniversary of Her Majesty the Queen. The issuing of numismatic coin programmes still continue today.
By the end of 1972 the currency in circulation amounted to CI$ 1,091,975 indicating the success of the newly introduced currency.
On 1 April 1974, the 1971 Currency Law was replaced by the Currency Law of 1974. This legislation enabled the Board to declare the parity of the Cayman dollar in terms of the US dollar, resulting in the CI $1 = US $1.2 relationship that exists today. A further revision to the Law was carried out in 1983 when the Currency Law of 1974 was repealed and replaced by the Currency Law Revised. This law has since been replaced by Section 22 of the Monetary Authority Law. This is as a result of the 2013 revision having consolidated all previous subsisting enactments to this law.
The Currency Committee which was formed prior to 1971 to consider the introduction of Cayman currency decided upon a decimal system of currency consisting of four notes of $1, $5, $10, and $25, and four ordinary circulating coins of the following denominations - 1 cent, 5 cents, 10 cents and 25 cents. In 1981 the Board introduced the new denominational values of $100 and $40 notes followed by the issue of the $50 note in 1985. The contracts for printing the notes and minting the coins continue to be awarded to Thomas De La Rue and Company Limited and The British Royal Mint, respectively.
On 1 January 1997, the Cayman Islands Monetary Authority was established as a body corporate under The Monetary Authority Law. This law replaced the Cayman Islands Currency Law. Under this Law, the former responsibilities, duties and activities of the Financial Services Supervision Department and the Cayman Islands Currency Board now fall to the Authority, which was created from the merger of these two bodies.
Today, the Cayman Islands Monetary Authority is the organisation responsible for the issue and redemption of Cayman Islands Currency.