What is non-circulating legal tender?

There are coins that do not circulate in the country in whose name they are issued. Are they coins at all? Yes, they are. These coins belong to the category of non-circulating legal tender, which is usually abbreviated to NCLT. A very large proportion of commemorative coins minted today, if not the majority, fall into this category.

What is the difference between legal tender and non-circulating legal tender?

Legal tender refers to all coins and banknotes that can theoretically circulate in a country. In practice, commemorative coins hardly ever do so. Only so-called circulation coins, i.e. coins that meet the technical criteria for circulation coins, are in circulation. Today, there is no other way. Otherwise, we would have considerable problems with payment transactions. This is because coins are now mainly processed by machines. Not only when we buy tickets or drinks. At the end of the day, most coins end up in a logistics centre where they are automatically sorted, accounted for, credited to the account of the person who deposited them, repackaged and delivered again. Commemorative coins would make this highly efficient process impossible.
For this reason, our coinage has been divided into coins suitable for use in vending machines and commemorative coins that are not suitable for use in vending machines. The latter are mostly made of precious metals and are produced at considerably greater expense. For this reason, mints sell them at a price that is often far above their face value. Nevertheless, these commemorative coins are (still) referred to as legal tender because a state guarantees that they are legal tender within its territory. In Germany, this means in practice that commemorative coins are accepted as legal tender by the Bundesbank and often by other banks as well.
A coin that we refer to as non-circulating legal tender, or NCLT, cannot be used as currency. No one is obliged to accept it as payment. For example, you cannot even use Canadian commemorative coins from the Royal Canadian Mint as payment at a Canadian bank. This caused quite a stir in Canada itself in 2016. At that time, the price of silver fell dramatically and many Canadians who had bought one of the attractive silver commemorative coins with a face value of 20, 50 or 100 dollars wanted to use them to pay for their next purchase. They were surprised to find that they could not spend these coins anywhere. To avoid a loss of reputation, the Royal Canadian Mint organised a simplified return option via the national post offices. This ended the commotion, but cost the mint several million Canadian dollars.

How can I tell if a coin is legal tender or non-circulating legal tender?

If you only see the coin, you cannot actually tell whether it is legal tender or NCLT. However, you can develop a suspicion based on certain criteria.

First, consider whether the coin is aimed at a target audience that corresponds to the country of alleged issue.

If an African coin depicts a German football star, there is a good chance that it was not produced for the domestic market but for export. Small island states in the Pacific, African governments and Native American tribes: if such nations are named as the country of issue, you should start thinking. Are there coin collectors in these countries?

Another important clue is the theme. National coins are often controlled by a government agency, and civil servants, like politicians, tend to be quite conservative. So if you come across a pop culture phenomenon – a film star, comic book hero or sneaker – it’s likely to be NCLT.

But beware: national mints copy the best-selling themes of NCLT. Italy has its Nutella coin, France has its Asterix on coins. However, in both cases, the theme and the country are closely related: Nutella was invented in Italy, Asterix is a French national hero. So they are legal tender. But if you see a coin from Palau in the shape of a bulletproof vest with the inscription MAGA, you can be sure that it is NCLT.

Are non-circulating legal tender coins worth collecting?

Are NCLTs worth collecting? Of course these wonderful coins are! On the contrary, NCLTs are often much more attractive than anything produced by state mints. They often feature the latest and most sophisticated minting technology. The first coloured coins, for example, were produced in Switzerland in 1992 (not by Swissmint, of course, but by Huguenin), but were officially issued on behalf of Palau. Today, even ultra-conservative Germany decorates its coins with colour. So if you enjoy technically exciting coins, NCLTs are the better choice.

You should also bear in mind that the mintage of national commemorative coins is often so high that an increase in value is unlikely. Of course, you should not speculate on this with NCLTs, but because motif collecting has become increasingly popular in recent years, you may well get lucky in one case or another.

The same rule applies to collecting NCLTs as to collecting modern commemorative coins: only buy a coin if you enjoy it, not because you hope it will have a high resale value. But the chance of seeing your money again is much greater if the mintage is slightly lower than the potential demand. And not at the time of purchase, but at the time of sale!

Why does the NCLT exist in the first place?

The NCLT is a phenomenon that emerged in the 1970s. At that time, many people began collecting modern coins made of precious metals. The reasons for this are irrelevant here. Suffice it to say that the state mints were unable to meet the increased demand.

This gave some resourceful entrepreneurs the idea of proactively approaching countries that did not issue commemorative coins themselves. They proposed to the relevant authorities that they would purchase the privilege of producing a certain quantity of coins on their behalf in return for a precisely defined sum. Each NCLT therefore has a contract with a country that specifies exactly how many coins are to be minted in the name of that country, their face value and the form in which the country’s national symbols are to be depicted on them. Depending on the nation, the country reserves the right to influence the designs. Some countries are fairly indifferent as to what coins are produced in their name. Other countries ask to see every single design before giving their approval (or not).

Once approval has been granted, a mint – either private or state-owned – and a distribution company work together to produce and market the NCLT series.

An enrichment of the genre

NCLT has brought a breath of fresh air to the commemorative coin genre. It has consigned the many politicians, writers, composers and other set pieces of classical educated society to the numismatic dustbin and shown that it is possible to mint coins that appeal to a younger audience. Without the competition and example set by NCLT, our commemorative coins would probably still look exactly the same as they did in the 1950s. And who would really want that?

Text and images: Ursula Kampmann