by Richard Giedroyc
August 13, 2013 – It’s a monopoly, but can it succeed? According to the Canadian Federal Currency Act, Section 11, it is unlawful for anyone to “melt down, break up, or use otherwise than as currency any coin that is current and legal tender in Canada” without first receiving a special license. Canada stopped minting its 1-cent coin in May 2012. The coin is being recalled, but it is also still technically legal tender. Since the coin remains as legal tender it continues to be illegal for anyone other than the Royal Canadian Mint to melt it.
Cents are expected to be retained by banks as they are redeemed. The banks then send the coins to the Royal Canadian Mint, which will sell the coins to industrial companies that will have permission to scrap the coins for their metallic value. It is estimated there are likely billions of 1-cent Canadian coins still being hoarded by the public. It will likely take years before these hoards are reasonably exhausted.
This government monopoly on the ability to scrap the obsolete cent is now being quietly challenged by the private sector. Postmedia News recently used access to information legislation to obtain correspondence between an individual seeking permission to scrap the coins and the Finance Department whose permission would have been required for that individual to follow through on his plan. According to documents received by Postmedia News, the name of the individual requesting permission is unknown due to his name being blocked for purposes of privacy from the documents examined. The person seeking the special license is described as being a “coin expert and entrepreneur in the industrial metals industry.” An e-mail sent to the Finance Department by this individual reads, “The metals would thus be re-injected into the Canadian industrial sector, while helping the federal government in reducing the number of such coins in circulation.”
A reply dated December 2012 sent directly from Finance Minister Jim Flaherty says, “As your proposal is not consistent with the Government of Canada’s objectives in phasing out the penny, which include extracting the metal value of redeemed pennies, I unfortunately cannot approve your request.”
At least two special licenses have been granted, one to an advertising firm attaching a coin to a mailer, and another to the currency museum of the Bank of Canada for a 17,000-cent mosaic display.
India and other countries have had problems with similar coins being smuggled out of the country to be scrapped for their metal value elsewhere. Will this happen in Canada as well? The only country with a common border to that of Canada is the United States. Will border security be able to discourage such activity?
Canada faces a logistical problem even if it can succeed in retaining its 1-cent coins within its own borders. The cent issued between 2000 and 2012 is composed of either the copper-plated steel or copper-plated zinc. Earlier cents are composed of other metals. Who is going to sort these coins, and at what cost? The Canadian government said it expects to save taxpayers $11 million Canadian per year by eliminated production of the cent. What additional costs will be incurred to recover the metal value of these coins, while ensuring the coins aren’t exported across a leaky border?