Demonetization

Demonetization involves removing the face value of a banknote or coin. It is the end of the possibility of exchanging previously withdrawn currencies. Thus, once demonetized, they can no longer be used for their intended purpose, and are no longer redeemed by the issuing central bank.

The causes of demonetization

Demonetization operations are generally organized by public authorities. Very difficult and delicate to apply, it is often justified by the obsolescence of the security systems protecting banknotes from counterfeiting. However, demonetization can also be justified by a switch to another currency.

Demonetization to combat counterfeiting

Central banks must issue banknotes that are protected against counterfeiting. As time goes by, counterfeiters' techniques change and tools improve. To stay one step ahead, the responsible authorities call on professionals to improve banknote security systems.

As new-generation banknotes are issued, the authorities demonetize the old ones so that counterfeits based on them are no longer used.

Demonetize to switch to another currency

The second possible cause of demonetization is the switch to another currency. Taking Europe as an example, several currencies were replaced when the euro was introduced. All 19 member states had to replace their local currencies with the single currency. Each applied a different policy of repayment and exchange of their former currency until their final demonetization.

For example, franc banknotes have not been used for payments since February 17, 2002, and have not been exchanged by the Banque de France since February 17, 2012. They are now demonetized.

Nous pouvons aussi citer les pays touchés par l’hyperinflation. En Yougoslavie durant l’année 1994, connait une inflation de 1.000.000%. Le gouvernement lance alors un programme de réformes et met en circulation un « super-dinar » en démonétisant l’ancien. Le Vénézuéla à connu cette situation deux fois en lançant le «bolivar fort» et plus récemment le « bolivar souverain ».