By Charles Morgan and Hubert Walker for CoinWeek ……
Royal Mint Refusal to Redeem Commemorative Coins at Face Value Calls Into Question Value of Modern Collector Issues from the UK
The Royal Mint of the United Kingdom, one of the world’s leading mints and manufacturers of circulating and commemorative coins, has established a disturbing precedent by actively advising UK banks not to redeem collector coins at face value–despite the fact that the Royal Mint states in its online product descriptions that collector coins are legal tender in the UK.
It’s a move that troubles industry insiders and the British public, many of whom were unaware that the commemorative coins they’ve bought over the years have no practical monetary value.
The issue came to prominence at the end of 2015, when the Mint learned of a scheme wherein buyers would order bulk quantities of the Buckingham Palace £100 commemorative coin only to later redeem them at face value.
According to article published in January 9 by the UK financial website thisismoney.uk, one man purchased 293 of the coins in order to accrue airline miles on his credit card.
It wasn’t his first time, either. The man, identified only as “James”, said he would “purchase the face value of coins of £20, £50 and £100 and max out [his] credit card.” Then he would take the coins to a branch of HSBC Bank and redeem them.
This seemed to work, until it didn’t.
For while James was making deposits, the bank was seeking guidance from the Royal Mint on what to do with these precious metal commemorative coins – coins that, while advertised as “legal tender”, were not intended for circulation.
An image purporting to be correspondence from Royal Mint regional director of sales Cheryl Morgan, dated January 5, 2016 and printed on Royal Mint letterhead, was posted on the This Is Money website. It seems to explain the mint’s position on redemption – however the letter does NOT contain a signature.
Further to discussions with a number of members I am writing to confirm the process for anyone wishing to redeem commemorative £20, £50 & £100 coins.
The coins are issued for commemorative purposes only and are not intended to be used as cash.
Members should not accept the coins at bank branches and customers who wish to return the coins should be referred to the Royal Mint.
We will accept the coins returned in their original packaging along with proof of purchase.
Grateful if you could inform members accordingly.
Regional Director of Sales
Presumably acting on the Mint’s guidance, HSBC refused the coins – but only after a teller had initially accepted them.
Fortunately for James (but maybe not so much for his preferred bank branch), he unloaded 210 of the coins before being told that the remaining 80 would not be accepted.
At the time of this writing, 80 £100 pound commemorative coins, if convertible to circulating money, would have a value of US$11,303, with an intrinsic value of approximately $2,441.60.
What is Legal Tender, Exactly?
A country’s government is empowered to enact its own guidelines as to what constitutes legal tender and what practical limitations apply to those rules within its sovereign territory.
In the United States, for instance, all “[U.S.] coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues”, while “…foreign gold or silver coins are not legal tender for debts.”
This means that a U.S. American Silver Eagle or $10 Olympics gold coin can be used as legal payment up to and including its face value. U.S. law does not provide for additional value to be ascribed to coins that are intrinsically more valuable than their face value.
In Canada, legal tender “refers to the money approved [by the government] for paying debts.” Unlike in the United States, Canada limits the legal tender of coins based on denomination.
And while Canada has no laws compelling businesses or banks to accept any form of currency as payment (the two parties of a transaction must agree on the payment method), when it comes to Canada’s commemorative coins–which, like the Royal Mint’s UK commemoratives, are struck as collectibles and not circulating money–“arrangements are in place with Canada’s major financial institutions to help customers redeem their face value coins, if they cannot directly return them to the Mint.”
So says Alex Reeves, senior manager of the Royal Canadian Mint’s Communications Department.
But the Royal Mint of the United Kingdom offers a much more nuanced definition of legal tender.
From the Royal Mint’s website:
Legal tender has a very narrow and technical meaning in the settlement of debts. It means that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation. Both parties are free to agree to accept any form of payment whether legal tender or otherwise according to their wishes. In order to comply with the very strict rules governing an actual legal tender it is necessary, for example, actually to offer the exact amount due because no change can be demanded.
In addition, the Royal Mint provides the following guidelines for the maximum legal tender of each of the coin denominations that it strikes:
- £100 – for any amount
- £50 – for any amount
- £20 – for any amount
- £5 (Crown) – for any amount
- £2 – for any amount
- £1 – for any amount
- 50p – for any amount not exceeding £10
- 25p (Crown) – for any amount not exceeding £10
- 20p – for any amount not exceeding £10
- 10p – for any amount not exceeding £5
- 5p – for any amount not exceeding £5
- 2p – for any amount not exceeding 20p
- 1p – for any amount not exceeding 20p
It is interesting to note that the coin denominations of £20, £50 and £100 are all special commemorative issues, and not struck for general circulation. Yet, according to the Royal Mint, coins in these denominations have unlimited legal tender status.
Up until January 2016, there was no mention made on the Royal Mint’s website regarding limitations to the legal tender status of collector coins.
But on January 10, five days after the purported letter from the Royal Mint that advised banks not to accept collector coins, the Mint updated their Legal Tender Guidelines, adding the following language about certain denominations of collector coins:
In practice this means that although the face-value UK coins in denominations of £5, £20, £50 and £100 are approved as legal tender, they have been designed as limited edition collectables or gifts and will not be entering general circulation. As such, UK shops and banks are not obliged to accept them in return for goods and services.
We receive a lot of enquiries about face-value coins (including £5 crowns, £20, £50 and £100 coins) and their legal tender status. Each issue is authorised by Royal Proclamation in accordance with the requirements laid down by the Coinage Act 1971. This means that in common with coins in general circulation these coins have legal tender status.
Please note that whilst the coins are legal tender, banks are not obliged to accept the coins. The Royal Mint cannot accept returns of such coins outside of the 14 days return policy.
The new language is convoluted but seems to say that businesses, banks, and even the government are under no obligation to accept the coins at face value under any circumstances. It makes no mention of the Mint’s possible role in advising these companies and institutions not to accept the coins in the first place.
Beyond that, by emphasizing the limits on its return policy (which, of course, any responsible retailer should have in place and state plainly), the Royal Mint is making it clear that it is not offering to redeem the coins as legal tender but will instead grant refunds for these collectible items as retail consumer goods.
Pages for individual coins for sale on the website were updated as well.
The description for the 2015 Longest Reigning Monarch UK £20 Fine Silver Coin was changed from “A coin worth its intrinsic value – £20 for £20” to “This coin has been designed to be a limited edition collectable or gift and will not be entering general circulation. As such, UK shops and banks will not accept it…”
The same goes for the Buckingham Palace 2015 UK £100 Fine Silver Coin and the Britannia 2015 £50 Fine Silver Coin, among others.
Why It Matters
Without getting into its defining physical characteristics, a “coin” as such is a monetary instrument issued under the authority of a government. If you’re using it in the sovereign territory of the issuing government, then a coin has historically been backed by the force of law as a method of payment for debt obligations.
In other words, most people would reasonably believe that a coin by definition has what is understood as legal tender status. You can spend them.
Nevertheless, the Royal Mint suggests that this commonly-accepted aspect of coinage applies solely to coins struck for general circulation. It assumes a special, quasi-legal space for commemorative issues that allows the government to market the material as legal tender–going so far as to stamp widely-understood legal tender denominations on the coins themselves–and then recuse itself, after the fact, of the debt obligation once the issue is released. All without notifying the public (including potential buyers in a secondary market) or allowing an exchange window.
Under normal circumstances the differing assumptions of the Mint and its consumer base wouldn’t be an issue, as the typical Royal Mint collector coin costs several times more than its face value and a rational individual may not find the idea of using it as money in a third-party commercial transaction an attractive proposition.
Consider the forthcoming Beatrix Potter silver 50p coin that the Mint is offering for £55 and marketing as the “first and only official UK coin to celebrate Jemima Puddle-Duck”. It contains eight grams of silver, which is worth approximately £2.34 at the time of writing.
Or the 2016 Great Fire of London cupro-nickel £2 coin featuring the delightful edge engraving “THE WHOLE CITY IN DREADFUL FLAMES”. That coin costs £10.
Spending either one of these is an inefficient way to rid yourself of these novelty coins.
But that wouldn’t necessarily be the case for the Royal Mint’s larger denomination coins, offered to collectors at face value. Frankly, the redemption of these coins should have been expected; in a thin secondary market, dealers and collectors would be just as likely to cash them in as sit on the inventory looking for a buyer.
Dealers in the U.S. CoinWeek spoke to concerning these higher denomination coins suggested they would only buy the coins at below face value. And based on the Royal Mint’s publicly-stated position on the matter, we imagine that the same will hold true eventually in the UK as well.
The legal tender status of numismatic items is a major reason why collectors purchase coins from the world’s national mints. The Royal Mint would know this simply by looking at the volume of business they do in legal tender coinage compared to the sales figures for medals, tokens, and all the other non-coin material.
Furthermore, in the case of the 293 £100 coins, the Mint did not have to honor that order. According to the WayBack Machine, the Mint had imposed a strict limit of 10 coins per household on the issue. That limit was later lifted.
And while Gresham’s Law (bad money chases good out of the market) would see to it that collector coins containing silver would get scooped up by hoarders, it would appear that the Royal Mint has tried to find a new application of the 45-year-old Coin Act to justify the fact that it can strike these souvenir trinkets at will, market them to loyal customers as real coins and then, through backdoor channels, instruct banks not to accept them at face value.
Collectors deserve and should expect better. The Royal Mint has let them down.
Editor’s Note: In preparation for this article, CoinWeek reached out to the Royal Mint for comment. As of press time, we have not received an official response. We do, however, expect to receive one later in the week. CoinWeek will post the Mint’s response as soon as it arrives.
 31 U.S. Code § 5103 – Legal tender
 Currency Act. R.S.C., 1985, c. C-52: http://laws-lois.justice.gc.ca/eng/acts/C-52/page-1.html