Introduction

Coins are everywhere until they’re nowhere, and at the moment they aren’t very easy to find.  Coins have almost been eliminated from circulation by the global epidemic's disruption of routine habits, which has rather accelerated the move towards cards, applications, and other cashless payments that may soon make the coins obsolete.

Studies show that China has ambitions for a digital currency, while the U.S. Federal Reserve is engaging in "research and experimentation." Facebook is developing its own money, while Bitcoin's supporters are still on the lookout. By using their phones to make payments or do their shopping, millions of people have started to avoid coins altogether. 

History of coins in the world

Coins have been around for thousands of years, and they have contributed significantly to the growth of civilizations and the world economy. The concept of using standardized objects as a medium of exchange can be traced back to ancient Mesopotamia (modern-day Iraq) around 3000 BCE. Early forms of money included commodity money, such as shells and beads. However, the first true coins were minted in ancient Lydia (present-day western Turkey) around the 7th century BCE. 

Many nations abandoned the gold standard in the 20th century, which tied the value of money to a certain quantity of gold. As a result of this change, fiat currency—whose value is determined by government decision rather than by the intrinsic value of the metal in the coin—is now widely used.

History of coins in Nepal

The history of coins in Nepal is rich and spans several centuries. Coins have been used in Nepal from the beginning of written history. The Licchavi dynasty, which ruled from the 4th through the 9th centuries CE, is believed to have produced the first coins ever found in Nepal. These early coins included a variety of symbols and inscriptions and were made of silver and copper. 

The paisa and mohar were replaced by the rupee and the paisa in 1955 when Nepal switched to a decimal currency system. One rupee today in Nepal is split into 100 paisas. It's crucial to remember that political shifts, economic reforms, and modernization have all contributed to changes in the designs and values of Nepalese coins over time. The Nepal Rastra Bank, which regulates the nation's currency creation and circulation, is the central institution in charge of coins and currencies in Nepal. 

Why did we shift from coins to paper currency?

As economies grew, it became impractical to use coins because no one could carry around enough to cover the items that were being bought and sold. Imagine if a large business or a government had to pay for everything they bought with coins!

When that happened, people started using paper documents that would promise to deliver a certain amount of gold or silver upon demand. For instance, a one dollar bill could be taken to the bank or to a government office and traded for one dollar's worth of gold. Because people knew that this piece of paper entitled them to get the valuable metal they really needed, they accepted it. Then, they figured out that they didn't have to exchange the paper for the metal. Instead, they could just use the same paper to pay for their own purchases. As people began to understand and accept paper money as a true currency, paper became more common.

Coins, however, are still used in many nations today, but electronic means of payment are often used in addition to or even in place of coins. Coins still have cultural and historical value, and numismatists (a person who collects and studies coins and medals) from all over the world enjoy collecting them. 

Importance of coins in an economy

Coins play a significant role in an economy and offer several important benefits. Here are some of the key reasons why coins are important in an economy:

Convenience: Coins are highly portable and convenient to use in day-to-day transactions. They are small and lightweight, making them easily transportable, especially for smaller purchases or when exact change is required. Unlike paper currency, coins are durable and can withstand wear and tear, ensuring their longevity in circulation.

Transactional Efficiency: Coins contribute to the efficiency of transactions, particularly for low-value purchases. They help reduce transaction costs by eliminating the need for complex accounting procedures associated with non-monetary forms of exchange. Coins can be quickly and easily exchanged between parties, minimizing the time and effort required for transactions.

Psychological and Behavioral Impact: The presence of coins in an economy can have psychological and behavioral effects. People tend to perceive physical currency, including coins, as more real and tangible compared to digital transactions. The act of physically handing over or receiving coins in a transaction can create a stronger sense of value and attachment, influencing spending and saving behavior.

Financial Inclusion: Coins are particularly important for financial inclusion, especially in regions or populations with limited access to banking services. Coins provide a means of participating in economic transactions without relying solely on digital payment methods. They offer a universal form of currency that can be used by individuals who may not have access to bank accounts or electronic payment systems.

In summary, coins are an integral part of an economy, serving as a medium of exchange, facilitating transactions, providing convenience, symbolizing national identity, acting as a store of value, influencing behavior, and promoting financial inclusion. While the use of digital payments is growing, coins continue to hold essential roles in economic systems worldwide.

Cost of producing coins in Nepal

Nepal does not have its own coin minting facility. The coins used in Nepal are produced by other countries. The Nepal Rastra Bank issues a contract and invites different channels willing to design and mint coins for Nepal. The company with the substantially responsive lowest evaluation bid is then selected and a letter of intent is published that grants them the permission to mint and deliver coins for Nepal. 

One-rupee coins:

As per the latest information dated 1st March,2021 on the Nepal Rastra Bank website, the letter of intent to design, mint and supply 300 million pieces of Nepalese Rupee 1 coin was given to Mennica Polska SA, Warsaw, Poland at the bid price of Euro 5,115,000.00 (EURO Five Million One Hundred Fifteen Thousand). On an average, the exchange rate for Euro to NPR in March 2021 stood at: EURO 1= NPR.141.

This concludes that to mint a single 1 rupee coin, it costs NPR 2.40 approximately. 

Two-rupee coins:

The information dated 4th March,2021 on the Nepal Rastra Bank website suggests that the letter of intent to design, mint and supply 100 million pieces of Nepalese Rupee 2 coin was given to The Royal Mint,UK at the bid price of GBP 1,664,000.00 ( Great Britain Pound Million Six Hundred Sixty Four Thousand). 

On an average the exchange rate for Pound to NPR in March 2021 stood at: POUND 1= NPR 160. 

This concludes that to mint a single 2 rupee coin, it costs NPR 2.66 approximately. 

In a nutshell, it costs Nepal more money to make coins than it’s worth. 

Can we do away with coins entirely?

The above statistic might roughly suggest that we stop the minting of coins completely to not bear the higher cost it brings with it. However, if the use of coins were to be significantly reduced or eliminated altogether, it would certainly have an impact on the economy. The following points suggest why abolishing coins entirely is not possible for Nepal:

Infrastructure and Technology: Transitioning to a coinless economy would require a robust and reliable digital payment infrastructure. Access to electronic payment systems, such as credit and debit cards, mobile wallets, and online platforms, would need to be widely available and accessible to all members of society which doesn’t seem possible for Nepal in the near future given the digital and financial illiteracy that exists. 

Financial Inclusion: Going cashless assumes that everyone has access to electronic payment methods. However, there are still segments of the population, such as the unbanked or those without access to reliable internet services, who rely heavily on cash-based transactions. Ensuring financial inclusion for all individuals would be crucial before fully eliminating coins.

Security and Privacy: While digital payments offer convenience, they also introduce potential security and privacy concerns. Robust cybersecurity measures and data protection regulations would need to be in place to safeguard against fraud, identity theft, and unauthorized access to personal financial information.

Transactional Challenges: Coins play a crucial role in everyday transactions, particularly for small purchases and in sectors where cash transactions are prevalent, such as vending machines, public transportation, parking meters, and small businesses. Without coins, these transactions would become more complicated, and alternative payment methods would need to be implemented.

Pricing Adjustments: Prices are sometimes set to accommodate the use of coins. If coins were no longer available, businesses might need to adjust their pricing strategies. For example, prices could be rounded up or down to the nearest unit of currency, leading to price changes for various goods and services. Prices are usually rounded up, ultimately increasing the average prices for the commodities contributing to inflation. 

Cultural Values: The use of coins is very common in Nepal during Pooja, weddings or any event of cultural or traditional significance. The ‘Chaurasi Puja’, a ritual that takes place to celebrate when someone reaches 84 years of age or 1000 full moons, has a tradition where the person turning 84 is weighed against coins only. To keep this tradition alive also, we cannot eliminate coins entirely. 

Conclusion

As stated earlier, it costs Nepal more money to make coins than it’s worth. However, the durability of coins as compared to that of paper currencies suggests that in the long run, coins sustain in the economy for a longer period of time than paper currencies which to some extent neutralizes the higher cost of production associated with its minting.  Taking into consideration the digital and financial literacy, it can be clearly seen that Nepal is not ready for a coin-less economy as of now.

It is also worth noting that some countries have already taken steps to reduce coin usage, but completely eliminating them requires careful planning, infrastructure development, and societal acceptance. The pace of transitioning to a coinless economy will likely vary across countries and depend on multiple factors, including technological readiness, financial inclusion, and cultural attitudes towards cash and digital payments.