After receiving Parliamentary approval this May, the federal government now has the power to remove legal-tender status from banknotes – something it could not do before last year’s budget proposal supported by the Bank of Canada.
Effective Jan. 1, 2021, the feds will use its newfound power to remove legal-tender designation from certain banknotes – the $1, $2, $25, $500 and $1,000 denominations – that haven’t been produced for years.
It’s “the final step to fully removing them as transactional notes in Canada,” according to a statement issued by the Bank of Canada this May.
While removing legal-tender status means these older banknotes no longer have the official status of being approved for payments of debt, they can still be redeemed at their full face value by the Bank of Canada or through other financial institutions.
Through the bank, people are asked to complete a claim form at bankofcanada.ca/banknotes/bank-note-redemption-service and mail their notes in a sealable, clear, leak-proof bag to the bank’s “Bank Note Redemption Service” in Ottawa.
The bank’s experts will then “carefully examine your submitted bank notes to assess their value,” according to the recent statement. It takes between 30 and 60 days for the bank to settle a claim.
SEVEN SERIES, 65 DENOMINATION VARIETIES
Since the Bank of Canada was established in 1935, it has issued seven banknote series, resulting in 65 different denomination varieties.
The $1 and the $2 notes stopped being issued in 1989 and 1996, respectively, and were replaced with coins (the now-famous loonie and toonie). Both the $25 commemorative note and the $500 note were discontinued shortly after being issued in 1935. Lastly, the printing of the $1,000 note stopped in 2000.
All varieties prior to the polymer Frontier series (2011-13) have been withdrawn and are removed from circulation as they surface. Despite the effort, the bank estimates nearly about 16 per cent of the $82.4 billion in banknotes circulating today are older series “that have not yet surfaced and are therefore considered to remain in circulation.”
“Notes no longer issued are being removed from circulation to be replaced with notes in current denominations that are recognizable by machinery and the Canadian public, increasing confidence in Canada’s bank notes,” reads the recent Bank of Canada statement, which adds the current polymer notes also contain more advanced security features than older notes so are more difficult to counterfeit.
More than 20 central banks around the world have taken similar actions to remove legal-tender status from some of their countries’ banknotes. These include the Bank of England; Sweden’s Sveriges Riksbank; the Swiss National Bank; the Reserve Bank of New Zealand; and the European Central Bank.