Canada's 5-cent coin under fire in report
- Published: May 13, 2016, 7 AM
Four years after Canada’s cent was demonetized, a report indicates the nation’s circulating coinage should continue to change.
Released May 2 by the Desjardins Group, an insurances and banking company in Canada, the unofficial report calls for the elimination of the 5-cent coin, and a transition to a system that would be based on coins denominated 10, 20 and 50 cents.
In the report, Desjardins senior economist Hendrix Vachon supports withdrawing the 5-cent coin, which has featured the iconic beaver since 1937.
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The 10-cent coin (featuring the Bluenose schooner since 1937) is a common sight, but the 50-cent coin (depicting Canada’s Royal Arms) hasn’t been issued for circulation in years and is a rare sight in pocket change.
Canada currently has no 20-cent coin, either — the 25-cent coin currently is the bridge between the 10-cent and $1 coins in circulation.
“Due to the gradual increase in the cost of living and decreased buying power of small coins, the time will come when the nickel will have to be taken out of circulation,” Vachon wrote. “We can already start planning for this change, so as to see it materialize within about five years.”
Should the proposals in the report be adopted and the 5-cent and 25-cent coins withdrawn, the size and composition of the 10-, 20- and 50-cent coins should be aligned “to minimize the costs of producing and using them,” Vachon wrote.
This is not the first time that the Desjardins Group has weighed in regarding Canadian currency — the group in 2008 issued a report calling for the elimination of the 1-cent coin, which came to fruition in 2012. The Ministry of Finance made the decision to withdraw the cent after years of pressure from advocates for its withdrawal and studies that found it cost more to make and use than its face value supported.
That 2008 study also reviewed the feasibility of issuing a $5 coin, but the issuance of polymer bank notes, including the $5 note, since then has met the need for a durable medium for that denomination.
“Eventually, the evolution of buying power could still justify changing to a $5 coin,” wrote Vachon in the latest report.
Cash will continue to have an important role in the payment system in Canada, because it currently is employed in nearly 40 percent of transactions, representing more than 20 percent of the value spent.
The Royal Canadian Mint has generally not taken a position on such reports and surveys, noting that the Mint creates coins at the request of the Minister of Finance.
In the past two decades, however, the RCM has achieved several technological breakthroughs to continue to make coinage relevant.
To reduce cost, the multi-ply plated steel alloy was developed in 1999 and is now used for all denominations in circulation.
In addition, multiple security features including laser marks on the die have been introduced for the $1 and $2 coins to strengthen security.
Finally, the Alloy Recovery Program developed in the early-to-mid 2000s withdrew literally tons of heavier copper-nickel alloy coins so that they could be melted, with the Royal Canadian Mint issuing new plated steel coins as replacements.
The program generated millions in revenue from the melted metal, as copper prices (among base metals, particularly) spiked later in the decade. The Alloy Recovery Program continues, with revenue of $22.6 million generated in 2015, an increase from $19.8 million in 2014, according to the RCM’s annual report, which was released May 9.
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