The U.S. has a coin shortage and you and I are being blamed for it. The government says that the shortage is due to the fact that we keep jars of coins (or cups or bottles) in our homes and do not turn them back into circulation. A group of trade associations that represent individual businesses including banks, retail outlets, truck stops, grocery stores and more is asking the Treasury Department for more help convincing Americans to get coins back in circulation, similar to efforts that began in summer 2020.
“We can’t print our way out of this problem,” said Austen Jensen, a senior vice president for government affairs at the Retail Industry Leaders Association. “If retailers are not able to offer change for cash purchases consumers who rely on cash will be vulnerable,” the associations said in a letter to the Treasury.
Thankfully, we are no longer feeding coins into phones and in most cases no longer in parking meters either. Dana used to get change at the laundromat to do her laundry but now she says the laundromat is also short of the coins. It seems that many of her fellow customers are either using credit cards or the special plastic coins which one can buy. Some countries are doing away with coins altogether although coins were always used to document the history of a country. In Israel archaeologists have uncovered coins dating back to the days of the Bais Hamikdash. So, eliminating coins altogether for many nations is not an option.
Covid had an impact on coin usage particularly because people were home and using credit cards to make on-line purchases. Coins are important for retailers and popular when people are shopping in conventional brick and mortar stores. In July 2020, the Federal Reserve restricted coin orders by financial institutions. The Fed also convened a U.S. Coin Task Force, made up of representatives from various federal agencies, which led to a campaign encouraging the public to get coins back into circulation.
There is a percentage of the population that simply avoids dealing with “change.” One large grocer said that some customers simply either say “keep the change” at the register or will dump the change into a cup designed for tips. Pennies are the most frequently “forgiven coin,” meaning customers would rather pass on getting pennies back as change. Still and all the US Treasury assures us that they will not stop producing coins or keeping coins as part of the US currency.
The question these days is not so much if coins will continue to be part of the US currency but whether they will become irrelevant altogether. We are rapidly moving into an age where the physical currency will be replaced by digital currency. There is already a move towards CBDC which is a digital form of central bank money that is widely available to the general public. Digital currency is defined as any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency.
As the global economy continued to expand and more business was conducted over the internet, it made sense that currency used as legal tender should also be digitalized. Most importantly, the digital currencies enable instant transactions that can be seamlessly executed across borders. For instance, it is possible for a person located in the United States to make payments in digital currency to a counterparty residing in Singapore, provided they are both connected to the same network.
As it is many business experts have for years complained that the transfer of money was too cumbersome. It often took days if not weeks to effectuate a wire transfer. Banks had to transfer money through their representative bank in a given country. This all seems arcane in a technological age where communications are instant.
One of the main concerns of the monetary experts was security. The old-fashioned way gave them several layers of protection that they opined was not available in swift transfers, especially between countries. The creation of Cryptocurrency was supposed to alleviate those fears. Cryptocurrency is any type of digital or virtual currency that uses encryption to safeguard transactions but is different from CBDC which is a central bank digital currency. Cryptocurrencies like Bitcoin and others are stored on a decentralized blockchain network, and transactions can be conducted, authenticated, and recorded in the public ledger sans any third-party interference.
Cryptocurrencies are not quite common to use yet in physical retail stores and it is still very unlikely that you have the possibility to spend your cryptocurrencies at your local grocery shop. However, it is important to highlight that more and more brands accept bitcoins payments.
The upshot of bitcoin is that technology is driving a great deal of commerce and the world is not waiting for the perfect cryptocurrency. A great deal of business is already conducted with the click of a button. The continued explosion of e-commerce means that the ultimate method of transferring currency as payment for goods and services is well underway. Larger transactions will continue to rely on secure methods of transfer.
Bitcoin which operates free of any central control, or the oversight of banks or governments may be setting the stage for many brands of digital currency that rely on peer-to-peer software and cryptography. A public ledger records all bitcoin transactions and copies are held on servers around the world. But that may be widely expanded in years to come as other public ledgers surface to keep track of digital transactions. Some in Congress are already lamenting about the lack of federal oversight over these digital brands. There is a move to introduce legislation to regulate the digital currency industry.
Do not discard your pennies just yet. They may be worth a lot more than one cent. The U.S. Mint announced that it will stop producing pennies beginning in 2022 and will make its last batch on April 1, 2023. Do not throw your nickels away either. There is a huge demand for nickel due to short-covering by one of the world’s top producers, according to Reuters. Buyers also rushed to secure the nickel supplies on the day, which are crucial for electric-vehicle batteries and stainless steel.
As for the future, it is abundantly clear that the world is moving towards digital.