Recent research on exchange rate regime choice in developing countries has revealed that a range of factors, from weak fiscal institutions to high costs of borrowing in their own currencies, limits the range of options available to these countries. This article uses the case of Liberia to illustrate that new states in Africa during the gold standard era faced similar limitations, even in the absence of formal colonial rule. The rapid depreciation of the Liberian dollar in the nineteenth century led to the adoption of sterling as a medium of exchange and store of value. This initially made it easier for Liberia to service its sterling‐denominated debt and for Liberians to purchase imports from Britain. However, as economic relations with the US deepened during the twentieth century, instability in the pound–dollar exchange rate created serious dislocations in the Liberian economy, ultimately leading to the official adoption of the US dollar in 1943. The story of Liberia illustrates the long‐standing challenges of globalization for peripheral economies and suggests the need for a reassessment of the origins and impact of colonial monetary regimes.