Central Banks and Cash Round-Up

In a continuation of our new series in Currency News providing a summary of the latest central bank annual reports to be released, this month is the turn of the Bahamas, Canada, Jamaica, Mauritius, Nepal and the UAE.

Each central bank reports differently – some go into a lot of detail about cash (circulation, management, counterfeiting), others not so much. And some not at all. And there are wide variations too in the reporting of payments more generally, including digital currencies. So comparing like-for-like isn’t possible, but more information can be found in the annual reports available on the central banks’ respective website, from which these summaries have been extracted.

(Whereas the $ is usually used to denote US dollars, in this report the $ refers to the currency of the country).

Central Bank of Bahamas (CBB)

As with other central bank reports in this issue, the CBB noted in its 2022 Annual Report that it has made important technical inroads on the digital currency project, which is ‘now poised for an increased emphasis on adoption in 2023… The greater efforts however, remained on developments within the technical platform, to complete the integration with the ACH; and upgrades to the digital wallet architecture to support increased involvement of Banks and credit unions in 2023, and faster growth in the merchant ecosystem for digital wallet payments.’ 

Last December the CBB released the first reprint of the CRISP Evolution $10 banknote, originally introduced in 2016 as part of a Counterfeit Resistant Integrated Security Product (CRISP) Evolution banknote family. The reprint incorporated several enhancements to better distinguish this note from the version released in 2017. Counterfeit banknote detection workshops were organised as part of education and training campaigns, and the CBB mobile banking app (CBB Banknote MAP) updated to support ongoing public education and confidence in the authenticity of circulating banknotes.

The Durasafe® substrate continued to improve average note lifespans of CRISP Evolution $100 and $50 banknotes and similar results are expected for the reprinted CRISP Evolution $10. The Hybrid™ substrate also improved durability in the $1 and $5 denominations. The effectiveness of the various anti-counterfeit initiatives is evidenced by continued low rates of counterfeiting detected over the last 10 years – less than 1.4 ppm in 2022.

In 2022 the volume and value of banknotes in circulation increased by 4% and 8% respectively to approximately 43 million notes with a value of $576 million. The number of coins outstanding increased by 1% to 870 million, representing 4% higher liabilities at $31.5 million.

The upward trend in adopting electronic payment transactions continued in 2022, supported by improvements in the systems and efforts of commercial banks to further encourage clients to use digital payment services.

There was greater overall use of credit and debit cards and automated cash dispensing services. Cheque usage remained low – volumes have more than halved in the last five years. The volume of debit card transactions increased by 18.2% to 20.8 million; by value the increase was 16.6% to $2.3 billion. The number of credit cards issued or renewed by commercial banks increased by 4.9%. The number of ATMs slightly reduced to 385 but the volume of cash denominated transactions conducted through them increased by 9.6% to 8.9 million and 11.9% in value to $2.1 billion.

Bank of Canada (BOC)

Roughly 3 billion Canadian banknotes were in circulation in 2022, 2.2% more than at the end of 2021. In terms of value, the figure was $119.7 billion, compared with $115.1 billion in 2021. This figure represents 29% of the Bank of Canada’s liabilities. The value has grown steadily in recent years (it was $90.1 billion in 2018).

Banknote research, production and processing expenses of $51 million were $4 million lower than budgeted, and 39% ($32 million) lower than 2021 due to lower volumes of banknotes being printed (in itself due to the timing of orders). They are budgeted to increase to $60 million in 2023.

The counterfeiting rate was 6 ppm – well below the BOC’s benchmark of 30 ppm.

The BOC continued its research into new security features for future banknotes, including testing features available on the market and advancing novel security features. The next step for the new $5 banknote is to select visual design elements and security features. The BOC will make these decisions once the Minister of Finance chooses the portrait subject. A shortlist of eight ‘bank NOTE-able’ candidates is under consideration.

Finally, as part of its commitment to achieving net-zero operational carbon emissions by 2050, the BOC began exploring how it could reduce the environmental impact associated with producing and distributing banknotes.

Separately, the BOC continues to explore the possibility of issuing a digital form of the Canadian dollar or CBDC which would provide benefits similar to cash and would be safe, accessible to everyone and private. It would not replace cash – banknotes will be supplied as long as Canadians want to use them. The BOC does not see a need for a digital dollar right now but plans to be ready if one is needed in the future.

Bank of Jamaica (BOJ)

According to the BOJ, currency in circulation at the end of 2022 was $233.7 billion, an increase of 3% compared to end 2021. Of this, $233.4 billion was in physical currency (banknotes and coins) with $0.3 billion in digital currency. The BOJ noted however, that the rate of increase was slower than that in 2021, primarily due to lower net issues of physical currency and an increase in the use of electronic payment channels.

The total value of banknotes issued in 2022 was $375.2 billion, an increase of 13.9% over 2021. Similarly, the total value of coins issued in 2022 was $1.5 billion compared with $1.3 billion in 2021, an increase of 18.6%. Banknote and coin redemptions in 2022 increased by 25.8% to $369.2 billion and 25.5% to $0.8 billion respectively.

Banknotes processed in 2022 came to approximately 282 million pieces with a value of $374 billion, an increase of around 27%. The total number of counterfeit banknotes detected in 2022 was 331, worth $0.6 million – a 42% decrease. This equated to a ratio of 1.4 ppm, compared with 2.5 ppm in 2021.

The BOJ noted that average circulation lives deteriorated in 2022 except for the $5,000 note: the $5,000, $1,000, $500, $100 and $50 were 44.1, 19.8, 14.3, 25 and 38.6 months respectively, compared with 31.8, 28.9, 18.8, 34 and 53 months in 2021.

In December 2022 the BOJ unveiled its new series of all-polymer banknotes, including an additional $2,000 denomination, with the intention of increasing circulation life, reducing counterfeits, creating greater differentiation between denominations and enhanced tactile features for the visually impaired. The new notes are due to go into circulation in June.

The BOJ also launched its CBDC, branded JAM-DEX in February 2022 following the pilot stage in 2021. Amendments to the Bank of Jamaica Act were passed into law on June 14, 2022, designating the BOJ as the sole authority to issue the CBDC, which is now legal tender.

Bank of Mauritius (BOM)

A key element in the BOM Annual Report was its approach to digitalisation and innovation.

The Bank has already embarked on several game changing projects, not least its CBDC (the Digital Rupee), virtual assets, payment systems, a national payment card and other technology-driven innovations. The BOM Act was amended in 2020 to allow it to issue a digital currency. It has sought the technical assistance of the IMF to bring the project to fruition. It is also working in close collaboration with selected universities and other central banks on the design features of a CBDC that will provide public confidence in the currency and similar attributes to cash.

In the financial year 2021-2022, banknotes in circulation increased by 7.5% in value and 5.4% in volume. Rs1,000 and Rs500 banknotes accounted for 65.6% and 12.9% by value and 32.4% and 12.8% by volume respectively. The Rs100 was the highest (20.1%) in volume. Denominations in polymer were the Rs25, Rs50, Rs500 and Rs2,000, which represented approximately 30% by volume and 25% by value of banknotes in circulation.

The total value and volume of coins in circulation in FY 2021-2022 increased by 7% and 3.7% respectively, despite the BOM maintaining the Coin Deposit Campaign launched in 2012 to encourage the public to deposit or exchange their coins with banks.

The BOM accepted deposits of banknotes and coins totalling Rs 31.5 billion in 2021-2022 and issued Rs 34.9 billion. It examined around 63.2 billion banknotes of aggregate amount Rs 32.6 billion over the same period, of which Rs 3.9 billion were found to be unfit for circulation.

Nepal Rasta Bank (NRB)

According to NRB), currency in circulation decreased by 11.6% in 2021-2022, compared with an increase of 16.6% in the previous year.

NRB’s master plan for the procurement of notes and coins was updated. In the current note printing cycle, contracts for printing 1.97 billion notes across the seven denominations were signed. Delivery of 1.14 billion of these has been completed.

In mid-July 2022, the stock of new notes was worth Rs 227. 86 billion of different denominations. In the previous year the stock was Rs 79. 81 billion.

From mid-July 2021 to mid-July 2022, 636 million banknotes of various denominations worth Rs 52.6 billion were issued into circulation. In mid-July 2021 the value of various denominations in circulation was Rs 683.5 billion, by mid-July 2022 the value had decreased by 7.46% to Rs 632 billion.

New banknote shredding and briquetting systems, intended to gradually modernise and automate NRB’s existing currency management system, have been installed in the new building of the Currency Management Department in Thapathali and in seven provincial offices and are now operational. A total amount equivalent to Rs 4.5 billion soiled, mutilated and torn banknotes deposited for exchange, together with notes ineligible for further circulation, were destroyed in 2021-2022.

Also, to modernise cash management, Cash Processing Solutions was awarded a contract for a Currency Verification and Processing System.

NRB placed purchase orders for 200 million Rs1 coins from the Mint of Poland and 100 million Rs2 coins from the Royal Mint UK, of which 90 million Rs1 and 40 million Rs2 coins were received in 2021-2022. 23 million Rs1 and nearly 20 million Rs2 coins were sold; 70 million Rs1 and 34.3 million Rs2 coins remain in stock.

The NRB has also completed a study and published a report on CBDCs.

Central Bank of United Arab Emirates (CBUAE)

In April 2022 the CBUAE launched two new polymer banknotes - the 5 and 10 dirhams. The new notes are the third issue of the national currency and reflect the CBUAE’s aim to keep pace with the nation’s development and vision in the next 50 years, particularly in the financial and economic sectors. They follow the success of the initial 50 dirham polymer note issued in late 2021 and, says the CBUAE, highlight its adoption of sustainable practices.

A comprehensive Central Bank Transformation Strategy was finalised in 2022 to complete the various elements of this wide-ranging initiative during 2023 -2026. The strategy and the ongoing pilot work on a CBDC are part of a larger, five-year strategic plan at the CBUAE called the Financial Infrastructure Transformation (FiT) programme.