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2.
2.1
INTRODUCTION
At a meeting at the FCO on 1st February 1977 between
A.J.T.Williams and representatives of relevant FCO Departments it was agreed that the Bank should undertake a survey, in co-operation with
the FCO (Hong Kong and General Dept. co-ordinating), in order to assess
the involvement of the dependencies in the issue of numismatic coins,
and should report on its results.
2.2
In the context of this report, the term "numismatic coins" is used to describe those coins minted and issued primarily for
collectors and investors. They are not intended for normal circulation within the territory of issue, but are mostly sold directly to overseas customers. The coins are usually struck in precious metals and carry distinctive designs (not incorporated in everyday circulatory coinage) which frequently commemorate notable events or personalities. The quality of finish is superior to that of circulatory coinage and is produced to two standards - "brilliant uncirculated", otherwise referred
to as "specimen", and "proof" (see Annex 2 for an explanation of terms).
Although such coins are not intended for normal commercial transactions,
it is an essential part of their definition that they should have legal
tender status (Sec. 8.6).
3. REASONS FOR THE SURVEY
3.1
During 1976, it became increasingly evident that the numismatic
coin programmes in certain dependencies (chiefly in the Caribbean) were
not only, in one case, of questionable legality, but also constituted
a substantial, and increasing, contingent liability for HMG. The Bank had for some time been fairly closely concerned with developments in the
Cayman Islands and the Turks and Caicos Islands, where, it was felt, the volume of issues was reaching disturbing proportions, particularly because the total face value of numismatic coins issued was already
several times that of ordinary notes and coins in circulation.
Additionally, in the Cayman Islands, the programme did not conform with
the Currency Law, 1974, which requires that all notes and coins issued should be backed fully by assets held in the Currency Fund. The system of royalty payments and the quantity of coins issued virtually precluded the possibility of complying with the Law.
3.2
Quite apart from any legal implications, the absence of
adequate "backing" in foreign exchange assets posed a potential threat to the territories' financial position. In the event of large-scale redemptions of numismatic coins, resulting from a deterioration or even