Why Was There a Coin Shortage? The Reasons Explained

The year 2020 brought about many unforeseen challenges, one of the more peculiar being a widespread disruption in the availability of circulating coins across the United States. This unexpected phenomenon led to numerous businesses displaying signs requesting exact change or promoting cashless transactions, making the public acutely aware of the issue. While often termed a “coin shortage,” the situation was primarily a complex problem related to the movement of coins rather than a fundamental lack of physical currency.

Disruption to Coin Circulation

The primary catalyst for the widespread coin scarcity in 2020 was a significant disruption to the established patterns of coin circulation throughout the economy. When the COVID-19 pandemic led to widespread lockdowns and changes in consumer behavior, the routine flow of coins from people’s pockets back into the financial system was significantly hampered. This created a bottleneck where coins were physically present in the economy but not moving to where they were needed for transactions. The U.S. Treasury estimated that in April 2020, the total value of coin in circulation was $47.8 billion, an increase from the previous year.

A major factor was the sharp reduction in consumer spending at brick-and-mortar businesses, which are traditionally significant conduits for coin exchange. With fewer in-person transactions, the natural process of coins changing hands slowed considerably, impacting the velocity at which money moved through the economy. Many businesses that typically handle large volumes of cash and coin, such as laundromats, retail stores, and restaurants, experienced widespread closures or operated at significantly reduced capacities.

The reduced business activity directly translated into a substantial decrease in coin deposits made by businesses into banks. Banks, which rely on these deposits to meet the coin demands of other businesses and consumers, found their inventories dwindling, leading to their inability to provide sufficient change. This break in the supply chain meant that even if the overall quantity of coins in the economy remained sufficient, they were not readily available for use by businesses and consumers. Concurrently, many individuals began holding onto their spare change at home, accumulating coins in piggy banks, jars, and car cup holders rather than spending or depositing them. This collective behavior further exacerbated the circulation slowdown, as billions of dollars in coins became stagnant outside the active economy.

While the U.S. Mint did initially slow production due to employee safety measures, this was a temporary measure and not the primary driver of the shortage. The Mint actually increased production significantly later in 2020, putting approximately 25% more coins into circulation than in 2019. The fundamental problem stemmed from the disrupted pathways for coins to circulate from consumers to businesses, then to banks, and back again, revealing a vulnerability in the cash ecosystem.

Federal Reserve Response

The Federal Reserve plays a central role in managing the nation’s currency and coin supply, acting as an important intermediary between the U.S. Mint and depository institutions like banks and credit unions. The U.S. Mint is responsible for producing new coins, but the Federal Reserve Banks facilitate their distribution to financial institutions to meet public demand. They also receive and process coin deposits from these institutions, ensuring coins can be recirculated.

In response to the circulation challenges, the Federal Reserve implemented several measures to address the scarcity. In June 2020, the Federal Reserve Banks began to allocate available supplies of pennies, nickels, dimes, and quarters to depository institutions. This strategic allocation aimed to ensure a fair and equitable distribution of the existing coin inventory, as banks were experiencing significant shortfalls in their usual coin orders.

The central bank also encouraged depository institutions to order only the coins they needed for immediate customer demand, rather than stockpiling. To gain a comprehensive understanding and develop solutions, the Federal Reserve convened the U.S. Coin Task Force in July 2020. This task force included representatives from all major participants in the coin supply chain, such as the U.S. Mint, armored carriers, banking associations, and retailers, to mitigate the disruption. Their collaborative efforts focused on restoring the normal flow of coins through the economy.

Community Role in Coin Movement

The widespread coin circulation issue also necessitated adaptations from businesses and fostered a collective effort from the public to help restore the flow of physical currency. Many businesses, faced with insufficient change, began to request exact change from customers or encouraged the use of cashless payment methods like debit cards, credit cards, or mobile apps. This shift was particularly impactful for small businesses and for the millions of households that rely on cash for daily transactions, including the unbanked or underbanked population.

Beyond these immediate operational adjustments, there was a concerted push to encourage individuals to return their idle coins to circulation. The U.S. Mint and the Federal Reserve, through the U.S. Coin Task Force, launched public awareness campaigns, notably using the hashtag #GetCoinMoving. These campaigns urged the public to spend their accumulated coins, deposit them at financial institutions, or use coin counting machines.

Some banks and businesses even offered incentives, such as cash bonuses or free items, to encourage people to bring in their rolled or loose change. These community-level initiatives aimed to get the substantial volume of coins held in households back into commercial channels. The collective participation of consumers and businesses was important in alleviating the circulation bottleneck, demonstrating how individual actions can collectively impact the broader financial system.