Iceland to replace smallest banknote

The Central Bank of Iceland has revealed that it is thinking about phasing out the 500 kronur banknote and replacing it with a coin as well as getting rid of the three lowest value coins.

The 500 kronur note, the lowest-value note in Iceland, could potentially, “in the near future”, be replaced by a coin as the central bank pushes forward in its move scrap the lowest value notes and coins and replace them with higher value ones. Last October, the Central Bank of Iceland issued the 10,000 kronur banknote, the largest in circulation, in an effort to streamline and facilitate payment intermediation in Iceland.

The bank explained in its annual report, published last week, that due to the fact inflation remains at a historical high, it has been necessary to make the value of notes and coins higher. It also noted that low-value banknotes generally are replaced by coins when prices rise. It highlighted the fact that in 1981, when the 500 kronur note was launched, it was the highest in value in Iceland, whereas now it’s the least valuable and looks set to be replaced by a 500 kronur coin.

There were an estimated 2.5 million 500 kronur notes in circulation as of 31 March – the third most common note. These were worth three per cent of the overall value of Icelandic banknotes in circulation.

The bank has also revealed that it is considering scrapping some smaller coins, with the annual report stating that some of the lowest value coins belong to the past. It said the coins are heavy, bulky and relatively expensive to manufacture compared to their purchasing power.