Currency and Coin Services About | Data | Additional Information As the nation's central bank, the Federal Reserve issues, distributes, processes, and accounts for Federal Reserve notes and coin in the United States and abroad. Congress passed the Federal Reserve Act in 1913, which mandated an elastic currency that would expand and contract based on public demand. The thirty-one Federal Reserve Bank cash offices provide cash services to more than 9,400 of the 17,000 banks, savings and loans, and credit unions in the United States. The remaining depository institutions obtain currency and coin from correspondent banks rather than directly from the Federal Reserve. The amount of currency in circulation depends on the public's demand for currency. Domestic demand largely results from the use of currency in transactions and is influenced primarily by prices for goods and services, income levels, and the availability of alternative payment methods. Domestic demand for currency, however, accounts for only part of the total demand. Foreign demand is influenced primarily by the political and economic uncertainties associated with certain foreign currencies. Recent estimates show that between one-half and two-thirds of the value of currency in circulation is held abroad. Some residents of foreign countries hold dollars as a store of value, while others use it as a medium of exchange. Currency When a depository institution orders currency from a Reserve Bank, the Reserve Bank prepares and pays the shipment out to an armored carrier company that is arranged by the depository institution. When a depository institution deposits excess and unfit currency with a Reserve Bank, the Reserve Bank stores the currency in secure vaults until it is verified, note-by-note, on sophisticated processing equipment. During the piece-verification process, deposited currency is counted, suspect counterfeit notes are identified, and unfit notes are destroyed. The fit currency is packaged and returned to the secure vault, and is used to fill future currency orders. The Federal Reserve distributes a large amount of currency to overseas markets through Extended Custodial Inventory (ECI) facilities and other depository institutions. The Federal Reserve established ECIs in 1996 to facilitate the introduction of new-design U.S. currency to the international community, to recirculate fit bank notes in overseas markets, and to strengthen the information on foreign use and counterfeiting of U.S. currency. The ECI program allows selected depository institutions to hold currency in their vaults but to carry the inventory on the books of the Federal Reserve. Coin The Federal Reserve's Cash Product Office (CPO) oversees the centralized management of coin. The CPO coordinates the distribution of coin from the Mint to the Reserve Banks, and acts as liaison among the Mint and the Reserve Banks. The CPO also monitors System level inventories and coordinates the redistribution of coin inventories between the Reserve Banks. The Reserve Banks distribute new and circulated coin to depository institutions to meet the public's demand. While the Reserve Banks store some coin in their vaults, they also contract with 179 coin terminals to store, process, and distribute coin on behalf of the Federal Reserve. Armored carrier companies generally operate the coin terminals; the coin terminal arrangement has improved the efficiency of the coin-distribution system. Federal Reserve Accounting for Currency and Coin Coin, however, is an asset on the Federal Reserve's balance sheet, and is a direct obligation of the U.S. Treasury. As an asset, the Federal Reserve buys coin from the Mint at face value. When a depository institution orders and deposits coin, its Reserve Bank adjusts the institution's account accordingly. |