US Coin Shortages Persist

Despite the increase in production at the US Mint, coins for general circulation are still struggling to keep pace with public demand, forcing the Federal Reserve to again limit orders from its customers, especially for dimes and quarter dollars. It is monitoring its inventories to determine whether order limits will be extended to cents and 5 cent coins as well.

The Fed first placed depository institutions on allocation in June 2020, because not enough coinage was flowing back to banks from retail establishments, whose business was impacted by COVID-19 pandemic restrictions.

The Federal Reserve’s Cash Product Office (CPO) then set up the Coin Task Force, partnering with the US Mint to alleviate the perceived shortages and distribution problems caused by the pandemic. After several months, the coin shortfalls and distribution channels appeared to have stabilised, and allocations were lifted.

However, ‘after a relatively stable first quarter of 2021, coin orders from depository institutions began to increase in March, with the most dramatic increase seen in the first two weeks of April,’ according to the CPO. ‘In addition, coin deposits to the reserve banks have been on a slow decline since January’.

The CPO notice further explained that ‘what initially appeared to be the normal seasonal increase in coin orders typical in the spring has developed into a sustained trend that significantly exceeds typical seasonal patterns.

‘The US Mint continues to produce new coins at increased production levels; however, increased demand from depository institutions is outpacing US Mint production and resupply available from low rates of deposits, resulting in the Federal Reserve’s coin inventory being reduced to below normal levels’ it said.

According to the CPO, its coin allocation methodology takes into account recent order volume by coin denomination and depository institution end user, current coin production levels and deposit levels.

The US Mint has four production facilities, two of which – Philadelphia and Denver – are used to produce circulation coins. It has not disclosed whether it is considering requiring those in San Francisco and West Point to begin producing more coinage for circulation.

The San Francisco Mint has been striking circulation quality quarter dollars for numismatic sales above face value, but not for release into commerce. The West Point Mint produced a combined 10 million of the five ‘America the Beautiful’ quarter dollars of 2019 for circulation release, to stimulate the collecting community and raise interest in US coins, but those 2019-W coins were expected to be pulled from circulation as collectibles.

Major changes to mutilated coin program

In a separate development, following years of review, the US Mint has developed new plans to protect the integrity of its decades-old Mutilated Coin Redemption program against potential fraud.

The Mint intends to handle the redemption of bent and partial coins at the Philadelphia Mint, which now has the necessary equipment and personnel to process such shipments in-house, rather than direct the coins to contracted authorised metal recyclers as it did in the past.

In 2015, the US Mint suspended the program in order to assess the security of the program and develop additional safeguards to enhance the integrity of the acceptance and processing of mutilated coinage. The assessment was an ongoing process, with additional safeguards being considered.

During that suspension period, the US Mint filed a civil complaint alleging irregularities in the program and seeking forfeiture of millions of dollars in mutilated coins submitted by overseas vendors for redemption. The program remained suspended until its resumption in early 2018, but was suspended again in 2019.

Proposed revisions include notice that the US Mint will establish weight and shipment limits for a maximum of 1,000 pounds of coins per month per participant.

Moreover, the US Mint plans to prohibit the redemption of purported coins shipped from outside of the country, after learning of counterfeits being included in a number of previous shipments. Millions of dollars-worth of mutilated coins are returned to the US each year, notably from China, where large quantities of vehicles, along with vending machines and laundry machines, are sent for recycling, resulting in large quantities of coins being retrieved but damaged in the recycling process.

Rejected shipments could be returned to the submitter or turned over to law enforcement.