Kirill Chernovol, Researcher at the Gaidar Institute's International Best Practices Analysis Department, commented on the US decision to stop minting one-cent coins for Izvestia, explaining that it was primarily driven by economic reasons.
"The US Mint has been suffering direct losses on pennies for many years: for example, in 2021, the cost of producing one coin was about 2.1 cents, with a face value of 1 cent.
By 2024, the cost had risen to about 3.7 cents per coin, with the total cost of producing pennies estimated at about $117 mn and the loss on their minting at more than $85 mn per year," the expert said.
Kirill Chernovol also referred to data from the Federal Reserve System: “The production and circulation of pennies is costly for both the state and participants in the circulation.” The total public cost per coin may exceed its face value, and discontinuing its production would save up to $100 mn per year.
As for the situation in Russia, according to the expert, the regulator's logic is similar. "Russia has already partially gone down the path of abandoning the most ‘expensive’ small denominations. Coins of 1 and 5 kopecks have not been minted since 2012, although they formally remain legal tender. At the time, their issuance was stopped precisely because their cost became several times higher than their face value," explained Kirill Chernovol.
He added that the need for cash is generally declining due to the development of the digital economy, where cashless payments dominate: “In Russia, about 86-87% of retail payments are made in non-cash form, and, for example, in 2019, this share was about 61% in Russia, that is, the demand for cash among the population is decreasing over the years.”