Recyclers of mutilated coins are left holding the bag for at least the short term now that the U.S. Mint has decided to hold off on restarting its coin exchange program while it mulls possible changes that could include annual submission limitations.
The program will remain offline but the Mint is seeking input on various proposed changes during a 14-day public comment period that closes Nov. 15, the U.S. Treasury Department said in a Nov. 1 Federal Registry notice.
Some of the safeguards the Mint is considering include requiring sellers to be certified in order to redeem coins, to demonstrate where the coins were obtained as well as set an annual limit, although the agency didn't indicate whether limitations would be by value or weight.
“The Mint is now seeking input on the effects of such measures on stakeholders, as well as other factors that should be considered to enhance the integrity of the acceptance and processing of mutilated coinage. ... The program will resume at such time as the new regulations are finalized and published,” according to the notice.
The announcement essentially delays the restart of the program and is bittersweet news to some domestic and foreign coin sellers, who question the remaining length of the suspension but welcome the government’s acknowledgement that the program will eventually resume.
“Not only does (the delay) bring a significant business hardship, it continues to impede the ability for regular suppliers to monetize a significant product stream. Moreover, it has also created a significant buildup of mutilated coin inventory with no alternative consumers,” one heavy media plant operator said.
The notice is also unclear. “On one hand the fact that the Treasury Department is finally beginning to move forward on the mutilated coin issue and is seeking comments is welcome news. On the other hand, what the Mint is considering raises a host of questions and requires much more specificity,” this source added.
Legal counsel for the Mint could not provide AMM with an estimate on when the program might officially resume. Following the initial comment period, the government will mull changes and then publish proposed changes with a second comment period to be held in the Federal Registry. No time frame can be determined for the duration of this process.
Other coin recyclers were more critical of the prosed suggestion to put a cap on the amount of coins one party can redeem.
“Putting limits on the amount of mutilated coin that can be redeemed hurts businesses, effects many jobs and shows weakness in the U.S dollar. If the U.S government can't even stand behind their own currency then how do they expect anyone else to,” Adam Youngs, managing member and co-founder of Portland, Ore.-based Portland Mint LLC, which buys, sells and stores bulk quantities of coins.
Ronnie Shahar, operator of private business Israel Currency Exchange and partner with Portland Mint, similarly questioned the validity of limits on participants.
“The U.S. government has redeemed mutilated coins for more than 100 years. It seems that changes to such a successful program will cause huge damage to full faith and backing of the world's reserve currency. An attempt to pose limits or other red tape is designed simply to make the program exist in name only. ... Changes to the program should never determine that a dollar is no longer worth a dollar,” he said.
Both Youngs and Shahar are embroiled in a lawsuit against the government, claiming it confiscated some of their coin shipments in violation of the Civil Asset Forfeiture Reform Act, as well as the Fourth and Fifth Amendments of the U.S. Constitution (amm.com, Sept. 13).
Meanwhile, the Institute of Scrap Recycling Industries (ISRI) said it welcomes the opportunity to comment on the impact of the program's suspension, as well as measures to enhance its integrity.
“While we are disappointed the Mint has decided to extend the suspension of the program and potentially impose annual limitations on the amount of coinage that may be redeemed, we hope that our input will help the Mint quickly resume operation of the redemption program. We also expect that many ISRI members will also provide comments to the Mint,” Billy Johnson, director of political and public affairs at the Washington-based trade group, told AMM.
ISRI’s attempts to work with the Mint to resolve the buyback program’s suspension prior to this announcement have had been met with limited success, he had said in September, referring to a letter from ISRI president Robin K. Wiener urging Treasury secretary Jacob J. Lew and Mint principal deputy director Rhett Jeppson to lift the freeze on the mutilated coin-redemption program (amm.com, July 15).
The program was first suspended for six months effective Nov. 2, 2015, so that the Mint and an independent contractor could assess the security and safeguard protocols in place following concerns about the possibility of unlawful activity. Litigation involving the buyback program, as well as additional time to complete its study, prompted the Mint to continue its suspension for an addition six months effective May 2 (amm.com, April 29).
Program participants have been unable to secure delivery appointments to redeem recycled coins for more than 18 months, prompting sellers to stockpile the damaged currency and subsequently creating what some see as a significant bottleneck of material throughout the supply chain.
Industry participants looked to the U.S government’s landmark decision to settle a federal lawsuit against two Chinese coin recyclers—Hong Kong-based Wealthy Max Ltd. and Dallas-based America Naha Inc. (amm.com, July 25), which had been accused of importing fake coins and redeeming them through the Mint—as a natural step toward lifting the moratorium on the program.
The U.S. government has agreed to reimburse coin recycler America Naha Inc. $2.65 million for a shipment of damaged coins it seized in 2014 despite claims in a federal lawsuit that the money was counterfeit (amm.com, Nov. 1).