Business and bank closures associated with the COVID-19 pandemic have significantly disrupted the supply chain and normal circulation patterns for U.S. coins. While there is an adequate overall amount of coins in the economy, the slowed pace of circulation has reduced available inventories in some areas of the country.
The Federal Reserve is working with the U.S. Mint and others in the industry on solutions. As a first step, a temporary cap was imposed on the orders depository institution’s place for coins with the Federal Reserve to ensure that the current supply is fairly distributed. In addition, a U.S. Coin Task Force was formed to identify, implement, and promote actions to address disruptions to coin circulation.
Since mid-June, the U.S. Mint has been operating at full production capacity, minting almost 1.6 billion coins in June and is on track to mint 1.65 billion coins per month for the remainder of the year.
As the economy recovers and businesses reopen, more coins will flow back into retail and banking channels and eventually into the Federal Reserve, which should allow for the rebuilding of coin inventories.
How did the coin shortage happen?
The problem is two-pronged: The U.S. Mint significantly reduced its production of coins after implementing safety measures to protect its employees from the coronavirus. Consumers are also depositing fewer coins at U.S. financial institutions, according to the Federal Reserve.
Because of coronavirus fears, many people have switched to using credit cards and mobile payments to avoid handling money. Meanwhile, the shutdown also forced some businesses to close that would normally help keep coins moving.
“With establishments like retail shops, bank branches, transit authorities, and laundromats closed, the typical places where coin enters our society have slowed or even stopped the normal circulation of coin,” Michael White, a spokesman for the U.S. Mint, said in a statement.
On June 15, the Federal Reserve said it would start capping the number of coins it allots to banks and financial institutions. The measure is expected to be temporary and based on institutions’ historical orders.
What should consumers do in the meantime?
While the Fed works to improve coin inventory and the U.S. Mint churns out more coins, there is one big part of the problem that still needs addressing: consumers.
Whaley said consumers should consider depositing their coins at a bank or spending them at a local business to get coins back in circulation. “If they’ve got coins in a rainy-day fund, I can’t think of a better rainy day than where we are right now,” he said.
The challenge will be the biggest for businesses, which are running short on coins and may not be able to get their full order of coins from banks. But some businesses are finding ways around the problem. Kroger, for example, is giving customers digital change on a customer loyalty card, which can be redeemed on their next trip to the store.
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