Tuesday, December 11, 2012

Is it Legal to Melt Coins?

Silver Coin Melt Values
In the United States, it depends on the coins.

In December 2006, the U.S. Mint issued a rule that generally prohibits the exportation, melting, or treatment of United States one-cent coins (pennies) and 5-cent coins (nickels). On April 10, 2007 the final rule was approved and became effective on April 16, 2007.

A violation of these restrictions can lead to a fine of up to $10,000, imprisonment of up to 5 years, and forfeiture of the subject coins or metal.

However, these rules have exceptions.

Wartime Silver Nickels

One exception is that the war nickels of 1942-1945 are not banned from being melted. They are specifically excluded from the ruling since they had a special wartime composition that included 35% silver. This was due to the fact that nickel was in great demand for the war effort.

The ruling also does not include any restrictions on the melting of silver coins. The reason has to do with the harm any coin melting would have on the U.S. economy. There are very few silver coins still floating around in circulation, so melting these would have no overall impact on the U.S. economy. So basically it is okay to melt down silver.

Don't Melt Those Pennies

However, with the metal content of the current penny and nickel either exceeding or having the potential to exceed their face value due to wildly fluctuating commodity prices, they are prime candidates for mass melting. This in turn creates the potential for a shortage of these coins. A shortage of these coins would have a harmful effect on the U.S. economy as merchants would not be able to give exact change in retail transactions.

These types of coin shortages have happened in the past, particularly in the 19th century as silver and gold prices fluctuated.

Coin Melting for Dummies

The dime and quarter dollar have no restrictions on melting as doing so with the current non-silver varieties would lose you money. For now, their face value still exceeds anything you'd get for the value of their metal content.

Resources

The U.S. Mint's press release concerning the final rule, and the Federal Register Notice for the final rule are both available online.