It is often said that the act of counterfeiting money is as old as money itself. No matter the type of currency used throughout history – whether it was the metal coins used in Lydia in 640BC or the cowry shells that were used as currency in Orissa, India until 1805 – there was sure to be someone intentionally attempting to pass off a counterfeit version as the real thing.
Ever since its inception, the United States has been brimming with counterfeiting activities. In fact, counterfeiting has been so prevalent and commonplace throughout US history that it has been estimated that a third of all currency in the United States during the Civil War period was counterfeit.
To combat counterfeiting, the answer has always been to redesign money. And in the United States, redesigned bills will be entering circulation sometime in the next decade.
The Upcoming Redesign of US Currency
Earlier this year, the Secretary of Treasury announced that the $5, $10, and $20 bills will all be redesigned. The purposes of the redesign are two-fold:
- to feature a more comprehensive history of America
- to make US money harder to counterfeit
Both purposes are good reasons to redesign the bill: one addresses a social aspect and the other addresses a financial aspect.
The redesign based on social reasons means that images and text on the bills will be historically and aesthetically enhanced. In other words, the goal is to make the historical highlights on the bills as visually appealing as possible. After all, who wants unsightly bills representing their country’s currency?
And the redesign based on financial needs means that the new bills most likely be enhanced with up-to-date security features. These up-to-date security features – discussed below – indeed will make it harder to counterfeit. If the security features on bills are harder to counterfeit in such a way they can pass for real money, the going theory is that criminals simply won’t counterfeit money because it’s simply not lucrative enough anymore.
“What you’re trying to do is create a banknote that’s very difficult to forge, either in being costly, or in effort. If someone has to go through a huge amount of effort to reproduce these to pass it, it’s not going to be a cost-effective proposition. If we make it just too difficult for them, they’re just not going to be tempted.”
For businesses, having currency that is much harder to counterfeit should provide some relief from worrying about fraud.Counterfeit money will be much less likely to financially hurt businesses. But this relief is about ten years away. The redesigned bills with updated security features are not scheduled to be released for another decade or so, at a date that is still yet to-be-determined by the US Federal Reserve.
Although the new designs haven’t been released, much less finalized, we can predict with relative confidence what the new security features on the bills will be. To get an idea of what we can expect from redesigned US bills, we should take a look at Australia.
Australia Releases its New $5 Bill
Australia has recently released a new $5 with a design primarily based on thwarting counterfeiters, with other redesigned denominations to be released in the coming years. Commenting on the release of the new $5 bill, the Reserve Bank of Australia Assistant Governor, Michele Bullock, said, “The reason for doing this now is to just make sure that we are staying well ahead of the counterfeiters.”
Below is a brief overview of the emerging, cutting-edge security features on the new Australian $5 bill that are not present on US currency.
There are also other security features that not publically listed, for obvious, security reasons. These undisclosed security features are what the government, banks, and other official entities use to make sure that money is real.
Cash is Still King
As much as it seems like the world is conducting the majority of its transactions using electronic means these days, 85% of transactions are actually still conducted using cash. Although some may consider cash too cumbersome and annoying to carry around and use, the majority of people still use cash for at least some of their transactions. The reason behind this is a matter of comfort: Cash is convenient, private, and intuitive. Quite simply, people trust cash.
Almost all cash-alternative options for transactions – credit cards, Apple Pay, Google Wallet – have fees affixed to them. Some merchants pass off that fee to their customers, some don’t. Either way, someone has to pay these fees for electronic transactions – fees that are not present at all for cash transactions.
In the electronic arena, the most promising cash-alternative option has been Bitcoin. Bitcoin, to put it simply, places all Bitcoin information – transactions, users, Bitcoin account amounts – as bits and pieces on private servers all over the world, which, in theory, makes the data inviolable; that Bitcoin is free from fake data. But yet many are still incredibly skeptical that Bitcoin is the answer to a cash-free world. As Nathaniel Popper, a finance and technology reporter for The New York Times wrote: “Bitcoin itself is always one big hack away from total failure.”
The Potential Effects of New Currency on Businesses
Although redesigning US currency to have updated security features can definitely deter counterfeiting, or at least, the counterfeiting of passable bills, it can potentially have unintended consequences that can actually ramp up counterfeiting attempts. Consider the following:
To be fair, however, the process of redesigning currency can be a bureaucratic nightmare. In fact, it took the Australian government around 10 years to place their new $5 bill into circulation, which is roughly the amount of time it will take to redesign the upcoming US bills.
Your business shouldn’t experience any more counterfeiting instances than before for the immediate future. But in the coming years, you can be sure to expect more counterfeiting instances in your stores - by criminals paying with either fake money or fraudulent electronic means - and subsequently, the proportional effects of counterfeiting on your profits. And once the new money is actually released into circulation, you can be sure that counterfeiting attempts will continue, especially by using counterfeit money based on the previous bill designs.
The one, sure positive effect that the new bills have will be that businesses can be confident accepting the new bills as real money: in comparison to the bills we have now, they will unquestionably be harder to counterfeit.
However, just like with any other redesign of money, it will only be a matter of time until criminals figure out how to create a passable, counterfeit US bill. We are at that point in time now - which is why the United States is currently in the midst of redesigning money.
When the current designs were released – the last one being 2008 with the $5 bill – criminals didn’t just figure out how to effectively counterfeit bills overnight. But fast-forward to today, and criminals all over the world have figured out how to make counterfeit money production so cost-effective that those previously in the drug trade are turning to counterfeit money production because it is more lucrative.
And once criminals figure out how to counterfeit the upcoming redesigned bills, we’ll be right back where we are already, giving the criminals another decade or so of a counterfeiting free-for-all while new, more securely designed money is developed.