THE FUTURE OF MONEY: COINS AND BANKNOTES HEARING BEFORE THE SUBCOMMITTEE ON MONETARY POLICY AND TRADE OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION SEPTEMBER 5, 2018 Printed for the use of the Committee on Financial Services Serial No. 115–113 ( U.S. GOVERNMENT PUBLISHING OFFICE 31–573 PDF WASHINGTON : 2018 VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER HOUSE COMMITTEE ON FINANCIAL SERVICES JEB HENSARLING, Texas, Chairman PATRICK T. MCHENRY, North Carolina, MAXINE WATERS, California, Ranking Vice Chairman Member PETER T. KING, New York CAROLYN B. MALONEY, New York EDWARD R. ROYCE, California NYDIA M. VELA´ ZQUEZ, New York FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia STEVE STIVERS, Ohio AL GREEN, Texas RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota ANN WAGNER, Missouri ED PERLMUTTER, Colorado ANDY BARR, Kentucky JAMES A. HIMES, Connecticut KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio MIA LOVE, Utah DENNY HECK, Washington FRENCH HILL, Arkansas JUAN VARGAS, California TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas DAVID A. TROTT, Michigan CHARLIE CRIST, Florida BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada ALEXANDER X. MOONEY, West Virginia THOMAS MACARTHUR, New Jersey WARREN DAVIDSON, Ohio TED BUDD, North Carolina DAVID KUSTOFF, Tennessee CLAUDIA TENNEY, New York TREY HOLLINGSWORTH, Indiana SHANNON MCGAHN, Staff Director (II) VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER SUBCOMMITTEE ON MONETARY POLICY AND TRADE ANDY BARR, Kentucky, Chairman ROGER WILLIAMS, Texas, Vice Chairman GWEN MOORE, Wisconsin, Ranking Member FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York BILL HUIZENGA, Michigan BILL FOSTER, Illinois ROBERT PITTENGER, North Carolina BRAD SHERMAN, California MIA LOVE, Utah AL GREEN, Texas FRENCH HILL, Arkansas DENNY HECK, Washington TOM EMMER, Minnesota DANIEL T. KILDEE, Michigan ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California WARREN DAVIDSON, Ohio CHARLIE CRIST, Florida CLAUDIA TENNEY, New York TREY HOLLINGSWORTH, Indiana (III) VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER C O N T E N T S Page Hearing held on: September 5, 2018 ............................................................................................ 1 Appendix: September 5, 2018 ............................................................................................ 33 WITNESSES WEDNESDAY, SEPTEMBER 5, 2018 Olijar, Leonard R., Director, Bureau of Engraving and Printing ........................ 5 Ryder, David J., Director, United States Mint ...................................................... 7 APPENDIX Prepared statements: Olijar, Leonard R. ............................................................................................. 34 Ryder, David J. ................................................................................................. 84 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Barr, Hon. Andy: Written statement from Sonecon .................................................................... 92 (V) VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER THE FUTURE OF MONEY: COINS AND BANKNOTES Wednesday, September 5, 2018 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MONETARY POLICY AND TRADE, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The subcommittee met, pursuant to notice, at 10:06 a.m., in room 2128, Rayburn House Office Building, Hon. Andy Barr [chairman of the subcommittee] presiding. Present: Representatives Barr, Williams, Lucas, Huizenga, Pittenger, Love, Hill, Emmer, Mooney, Davidson, Tenney, Hollings- worth, Moore, Foster, Sherman, Green, Kildee, and Vargas. Chairman BARR. The subcommittee will come to order. Without objection the Chair is authorized to declare a recess of the Com- mittee at any time. All members will have 5 legislative days within which to submit extraneous materials to the Chair for inclusion in the record. This hearing is entitled, ‘‘The Future of Money: Coins and Bank- notes.’’ I now recognize myself for 4 minutes to give an opening statement. Despite all the focus on innovative ways to exchange value or settle transactions, Bitcoin, Apple Pay, Venmo, and dozens more and with the increasing use of credit and debit cards, coins and currency still are a major factor in our retail economy. Cash may not be king anymore but it is still royalty and many Americans have a little of it in their pocket or purse right now. Even so, there is a really large amount of United States coins and banknotes circulating, all $1.7 trillion or so of it produced by one of two bureaus of the Treasury Department: The Bureau of Engrav- ing and Printing, which prints Federal Reserve notes and the United States Mint, which makes our circulating coins as well as some investor and collector coins. The nearly 4,000 people who work at those bureaus do a terrific job. That being said, it is up to Congress to ensure that the Mint and the Bureau of Engraving and Printing remain effective and ef- ficient and have adequate plans for the future, a future where in- novative payment options are likely to multiply and usage likely to grow. To that end, today the Monetary Policy Subcommittee welcomes the directors of the two bureaus to continue that discussion. There are real issues, real issues that have real impacts on both the econ- (1) VerDate Mar 15 2010 09:57 Nov 09, 2018 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\GPO PRINTING\DOCS\115TH HEARINGS - 2ND SESSION 2018\2018-09-05 MPT FUTU mcarroll on FSR431 with DISTILLER 2 omy and the Treasury’s General Fund in the near-term and, par- ticularly, in the long-term. One of those issues, that Congress has been prodding the Mint on for a decade, is the cost to produce circulating coins. The penny and the nickel both cost considerably more than their face value to produce. Thirty years ago, Canada and the United Kingdom changed to steel coins plated to look and function like their previous coins which in turn saved a lot of money and now these countries con- tract manufacture coins for a number of other countries. Why hasn’t the United States been the leader? Why didn’t we emulate them when their move turned out to be successful? Have we just wasted tens or hundreds of millions of dollars for no good reason? There are other coin-related issues, Congressman Mooney has been a leader in pointing out that there is an increasing problem of counterfeit copies of the Mint’s American Eagle investment coins, a problem that defrauds both investors and dealers. Again, other Mints around the world have inserted anti-counterfeiting technology into their bullion but the U.S. Mint hasn’t, why not? To be sure in our discussions with the Secret Service, there are anti- counterfeiting measures that have been put into place but we want to explore improvements in that area. Additionally, the Bureau of Engraving and Printing would like a new printing plant to replace its well-known one just down the street. That is potentially a reasonable request but more work probably needs to be done on cost controls and on pinpointing fu- ture banknote demand. Right now, spending close to $1.5 billion dollars to save $40 million a year makes sense if demand for bank- notes stays the same until maybe 2050 but not everyone imagines that demand will hold up. Finally, I hope that we will hear that the bureaus have contin- gency plans for the possibility that the demand for all cash and coins could dry up fairly quickly. It is unknown whether we are moving that rapidly to a cashless society but it is worthy of explo- ration. If that were to happen over just a few years, we would have about 4,000 employees and four major factories to think about repurposing. Additionally, the ability of the U.S. Mint to collect sei- gniorage from coins could be greatly reduced, ultimately increasing the Federal Government’s deficit by hundreds of millions of dollars annually and there may be logistical difficulties with converting paper and coin money into another currency medium. I don’t see that happening anytime soon, if at all, but someone needs to be thinking about it and I hope the directors can give us a hint about such plans. The Chair now recognizes the Ranking Member of the sub- committee, the gentlelady from Wisconsin, Gwen Moore for 5 min- utes for an opening statement. Ms. MOORE. Let me join the Chairman in welcoming our es- teemed witnesses for the day. As I was cleaning my bedroom and picking up all the pennies on the floor, this is a very appropriate time to talk about this matter, finding a little jar to put them in.