The new numismatic trend of high value face-value coins has caused some consternation for collectors. Here in the UK, I have been receiving quite a lot of e-mails from both coin dealers and collectors with regard to just what the new pound-for-pound coins are, how they can be redeemed, whether they represent good value for money, and what their potential as collectibles might be.
Recently these high face-value coins came to the attention of the British public when it was revealed that one customer purchased £29,000 of these silver £100 face value coins in an attempt to accumulate points on his air miles credit card. The news story alleged that he intended to redeem the coins at his bank after the points were added to his card. After redeeming the silver coins he did not intend to keep, he would have enough air miles points for a first-class holiday, and he hoped that would be the end of a problem-free transaction!
The reality, however, was very different. Much to his surprise, he was told that the coins could not be redeemed at his bank. After several letters and complaints, a letter emerged from the Royal Mint instructing commercial banks not to redeem the coins, offering little else in the way of an explanation of how to handle or process these coins.
I must admit, this growing controversy took me by surprise as I assumed that everyone knew a little something about how and by whom coins are issued in the United Kingdom. For many, this relatively new product range provides an affordable and enjoyable alternative to higher-priced collector coins (albeit with low face-values) and has emerged as its own genre of coin collecting. They appeal to collectors with their eye-catching designs and with the prospect that the coins will always be worth face-value, at least. Of course, these coins are not meant to be purchased in large amounts and then immediately deposited in a personal bank account. It was at this juncture, while reading through the chronology of events, that I said under my breath, “Why didn’t he do his homework before parting with £29,000 (USD $41,100)?”
These coins are marketed with the possibility that they’ll increase in worth due to their desirability as collectibles or silver content; it seems to be a “win-win” situation not often seen by those of us who buy or sell on the secondary market. The British range of coins is a result of the similar and successful Royal Canadian Mint silver coins, which range from $20 to $200 in denomination and weigh from just under eight grams to two ounces. At this year’s World Money Fair held in Berlin, these coins were prominently marketed by the Mints that produce them. I did see quite a few of these coins selling, with buyers mentioning they were buying them as gifts and for their personal collections.
But a barrage of comments in the public domain has recently emerged criticizing the product, the Royal Mint, and the difficulty of ascertaining just what these coins are. Are they legal tender, circulation coins, NCLT (non-circulating legal tender), novelty items with no real monetary worth, or just bullion pieces? Buyers commonly voiced frustration that they may not be able to recoup their purchase prices because banks or post offices will not redeem them, and, in the case of the Royal Mint, are not able to obtain refunds 14 days from their date of sale.
I myself do not have any of these coins and, to be honest, my feeling from the start has been that they don’t represent good value for money in the immediate term. First, in order to just recoup their face-value in silver content, the spot price for silver would have to more than quadruple, considering that an ounce of silver is worth just over $15 at the time of this writing. With the fact that the smallest-denomination face-value £ for £ coin is £20 (USD $29) and contains only half an ounce of silver (worth USD $7 or £4.70 at this spot price), I didn’t feel the figures came together to merit such a purchase.
So let’s look at what the coins really are: the £ for £ coins or any coins issued in the UK, are done so by HM Treasury, not the Bank of England, nor the Royal Mint. As such, they are technically, if not practically, instruments of currency. As I understand the structure of British coin production, the Royal Mint is specifically the official producer of the country’s coins; they do so under contract and the referenced value or denomination is technically and/or factually on deposit at the Treasury.
Again, my understanding with any collector coins and the commemorative £5 crown coins is that they can be redeemed anytime for current legal tender upon presentation, and this is where your local bank branch would or should come into this equation. By depositing these coins in your account, you are credited with the represented face-value; it is then through the bank’s channels and their cash processing mechanism that they deposit or redeem these coins back to the Treasury and are credited themselves for the amount you were credited.
Of course, there is a slim chance that the banks or post office will redeem these coins for you in large quantities without charging a handling fee. As many people know, circulation coins can also only be deposited in a personal account in small quantities or, again, a handling fee will be applied. This rule is in place in the US, Canada, and the UK.
Second, legal tender is currency issued by either a country’s treasury or central bank which can be readily or easily exchanged or accepted in the public domain for goods and services. Simply, it is circulation or “usable” money to be employed in the course of daily transactions.
Although there are no impediments to any person accepting these new £ for £ coins in business or private transactions, no business is legally obligated to do so. What we accept as currency outside the definition of legal tender is wholly up to individual discretion; this needs to be kept in mind when attempting to use these specialty coins for payments of any kind.
Having seen these coins up close, and having received a lot of e-mails asking countless questions about this line of products, I would like to offer some suggestions on how they might be improved for the long-term benefit of both mints and collectors.
- I’d be inclined to advise mints producing similar items to re-label them as being “redeemable for their face value,” instead of marketing them as legal tender, which — strictly speaking — they aren’t. The Mints need to stipulate just how one would go about redeeming them, should someone wish to do so once the coins have left their facility. £100 is an awful lot of money to have in your drawer without a way to redeem it, as these coins cannot be spent like a bank note or circulation issues.
- Offer these coins at banks and post offices, as well as at the Mint. Similar silver coins are not unfamiliar in other countries in Europe (such as Spain’s €30 for €30, Denmark’s KR500 for KR500, or Germany’s newest €20 for €20 issue), where you can simply exchange legal tender for these items at commercial banks and post offices. If you change your mind, you bring them back to where you got them and exchange them again over the counter for their cash value. I would like to point out that none of these European coins has anywhere near the metal value content represented by their face value, but this doesn’t seem to be an impediment to collectors.
- Most importantly, for future issues of Royal Mint £-for-£ coins, I would also recommend including incused lettering on the edges of all these coins which could read “REDEEMABLE FOR £20/50/100 AT HM TREASURY,” and include a declaration in the literature or certificate of authenticity stating that the coins are sold for collector purposes and are not meant as circulation pieces. It should also be made clear that the issues can only be redeemed at the offices of HM Treasury (or accepted representative offices) for their stated face value via commercial banks or post offices. Then the consumer can make a more educated decision as to whether they want to invest, collect, or buy these coins as a gift or memento.
I would imagine that these coins could only lose their redeemable status if the Treasury decides to de-monetize them by removing their exchangeable status. Should this ever occur, the coins would only have either an intrinsic metal scrap value or collector value.
Problems like the ones I have been reading about seem to arise when perception is inaccurate about the products. Since the Royal Mint are marketing and retailing these items, they could be mistaken for the actual issuers. Recent stories of collectors or members of the public trying to cash them in after purchase and coming up against a brick wall have done little to boost the reputation of the product line, the hobby, or the Mint’s integrity, and I fear this scenario will continue unless there are clear and specific instructions on how these coins can be redeemed.
My comments are not meant to criticize these products in any way. If mints manage to create a new product that develops a following then, as an avid collector myself, I say, “Great.” But I strongly believe there is a responsibility for the retailer–and in this case producer–to state the explicit status and monetary category these coins fall under.
Currently, the alternative for quite a few purchasers of these coins has been sell them to precious metal merchants for the silver content alone. After losing quite a lot of money in the deal, these well-intentioned collectors or investors may never buy another coin product, which could not have been among the mints’ intentions. Greater clarification is needed.