Reason for Withdrawal of low-denomination coins
The decision to withdraw a country's lowest-denomination coins from circulation is not an uncommon occurrence, and it can be due to a variety of reasons.
The cost of production is one factor that often plays a significant role.
When the cost of producing a coin exceeds its actual worth, it becomes uneconomical to continue minting it.
This was the case in Canada in 2012 when the country decided to phase out its penny, which cost 1.6 cents to produce.
Another reason for the withdrawal of a coin from circulation is its low purchasing power and utility.
In some instances, coins become so small in value that they lose their practical use, and their purchasing power is eroded after years of inflation.
For example, in Switzerland, the 1 Rappen coin had become so insignificant by the early 1980s that it was rarely used.
Although the coin was still produced until 2006, it was in ever decreasing quantities.
The decision to withdraw a coin from circulation is not always straightforward, and in some cases, it can lead to debates about its impact on inflation.
In the UK, the Treasury department initially argued for the retention of the decimal halfpenny, as its withdrawal was thought to drive up inflation.
When a coin is withdrawn from circulation, its legal tender status can vary from country to country.
In New Zealand, withdrawn coins are no longer legal tender, while in Australia, they remain legal tender indefinitely.
When a coin is no longer minted, cash transactions are typically rounded using Swedish rounding.
The use of pennies and their equivalents has been questioned in several countries, including the United States.
In the eurozone, different countries have taken different approaches to the issue.
In Germany, where precise pricing is highly valued, scrapping low-denomination coins is considered unthinkable.
In some cases, coins that have been withdrawn from circulation can be exchanged through private companies.
Decimal halfpennies in the UK can be paid into bank accounts at the discretion of commercial banks but cannot be exchanged by the general public at the Royal Mint.
In conclusion, the withdrawal of a country's lowest-denomination coins from circulation
due to various reasons, including the cost of production, low purchasing power, and low utility.
The legal tender status of withdrawn coins can vary from country to country,
and rounding is typically used for cash transactions when a coin is no longer minted.
On 30 June 2011, all coins in denominations of 25 paise and below were officially demonetized.
