(11)
On the assumption that existing rights were unchanged
th course would serve to limit (once for all)
the risks accepted by those issuing authorities
that cannot or will not maintain adequate backing.
It could also relieve HMG from any increase in its
contingent liability. It does not imply that
currency authorities now adequately covered must
adopt the new arrangement but it might well encourage
some to make a change in order to increase their income.
(h) Removal of legal tender status and demonetisation
This course would relate primarily to existing
coin issues though it would necessarily apply to
future issues too. It main objective would be to
limit convertibility/redeemability by deliberately
shortening the periods during which particular
coin issues were legal tender or redeemable.
While the present strength of the coin market lasts
there would be opportunity to remove some of the
existing liabilities of dependencies by regular
demonetisations with little risk of provoking
large-scale exchanges or redemptions, although any
steps to demonetise or even "de-legal tender"
coins too soon after their issue would result
*
in damage to the territory's reputation especially
if the coins' legal tender status had been
emphasised in the original marketing campaign.
NOTHING TO BE WRITTEN IN THIS MARGIN
(
It would therefore be sensible to begin a process
of demonetisation with the earliest issues.
(i) Guarantees by promotional companies to repurchase
redeemed coins
If redeemability is to be maintained there is a
case for encouraging such guarantees which provide
limited safeguard.
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