By an act of May 1777, a state Loan Office was established in Williamsburg to borrow money for the prosecution of the war. The "Act for Sequestering British Property," drafted by Jefferson and passed in early 1778, contained a provision which was part of an effort to stabilize the currency and increase the flow of funds into the Loan Office. It allowed Virginia citizens to pay off their British debts in depreciated currency, with the state assuming responsibility for discharging the debt as if the payment had been made in hard currency. This provision was repealed in May 1780 and the Treaty of Paris and post-war court decisions made the payments into the Loan Office between 1778 and 1780 invalid as a discharge of British debts. The Virginia treasury eventually repaid the money, at its true hard currency value and with interest, to the original depositors.
Primary Source References
1779 June 25. (Jefferson to James Madison Sr.). "I have recd. from Mr. Hunter L2000. I shall not put it into the loan office as it is does not appear that Certificates will be taken in payment for land."
1780 June 16. "Pd. into the loan office for A.S. Jefferson L2235 to be repaid in tobo."
See Hening, William. Statutes at Large, (Richmond: Printed for Samuel Pleasants, junior, printer to the commonwealth, 1810-1823), 9:286-289, 377-380; Isaac Harrell, Loyalism in Virginia, (Duke University Press, 1926), 80-83, 127-130, 171-173; PTJ, 2:170-171; MB, 1:474, 1:480, and 2:1009.