What Is a Silver Coin, Really?

Posted on October 19, 2022

A newcomer who wants to buy silver bullion can and will be misled by silver rounds. It’s easy to understand why! I mean, just take a look… silver coin and silver round compared I can’t imagine why people think this is confusing… can you? Honestly, I get it. We intuitively know what coins are supposed to look like. From the first electrum coins struck in ancient Lydia 2,600 years ago to the change in your pocket, coins are discs of metal stamped with images. (If it looks like a duck…) But so-called “rounds” aren't considered coins. They’re silver bars with a coin shape, valued almost entirely based on their weight of silver. (By the way, everything we'll say here applies to gold too, but since silver coins are what prompted us to make this piece, we'll talk about silver.) So what’s the difference between a silver coin and a silver round? Here’s the difference: coins can only be minted (or authorized for minting) by a sovereign nation. A coin is legal tender in the nation that issued it (and almost always has a “face value”) which signifies its official status. For the purposes of the issuing country, it's money. This makes all the difference to numismatists and coin collectors -- and if you've shopped around a bit, you can see that silver coins universally command a higher premium over spot price than silver bullion bars or rounds. Silver rounds? Well, anyone can mint silver rounds. No one can stop you. But what happens when we play with the definition of "country" a little bit? Here is where you’ll find some of the more unusual entries into the silver coin market...

The curious case of Tuvalu

Never heard of it? Not your fault! Tuvalu only become an independent state under in 1978 (as much as one can consider British Commonwealth nations independent, that is). And with a population of just 10,000, it kind of stretches the definition of “country,” being the world’s second-smallest sovereign nation. Tuvalu first became famous in the mid-nineties, when the entire nation’s economy was supported by selling its very own top-level domain name, “.tv” to aspiring tech startup moguls around the world. These days Tuvalu's economy relies on issuing collectible stamps for the philatelists and silver bullion coins. Now, the coins issued by Tuvalu look, in most ways, an awful lot like coins you’d see from Royal Canadian Mint or U.S. Mint. But surely, this tiny island nation can’t support and maintain a modern minting facility? Indeed, the CIA World Factbook’s entry on Tuvalu has this to say:
The country is isolated, almost entirely dependent on imports, particularly of food and fuel…Tuvalu has few natural resources, except for its fisheries. Earnings from fish exports and fishing licenses for Tuvalu’s territorial waters are… more than 45% of GDP.
With these constraints in mind, how does Her Majesty Queen Elizabeth II (soon to be replaced, presumably, by King Charles III)’s image and a face value wind up on Tuvalu coins? Perth Mint knows:
As an official issuing authority, the [Tuvalu] government launched what has become an internationally recognised modern numismatic coin program featuring many remarkable collectable and investment issues.Yet without any significant industry in Tuvalu, people often wonder how this came about.The answer is that Tuvaluan coins are made in Australia – a country blessed with gold and outstanding minting credentials.
So Perth Mint makes Tuvalu’s coins – and not just the gold and silver coins, either! Perth Mint also produces the nation’s circulating coinage. No mines? No worries, mate! Australia is the world’s 7th-largest silver producing nation and the world’s #2 gold-mining nation. Last year, Perth Mint refined nearly 18 million ounces of gold and silver bullion. As for face value, well you’ll see Tuvalu silver coins with face values of $1 – but that’s not U.S. dollars. It’s not even Australian dollars. Perth Mint tells us:
Tuvaluan coins remain a variation of the Australian dollar distinguished by the currency code TVD.
Now, as we’ve already established, a round piece of silver with a face value is a sovereign coin – which adds to its price, and also makes it easier to sell on the market. Listen, I’m not throwing shade on Tuvalu! Honestly, they had a great idea! I Imagine the Prime Minister of Tuvalu had an intriguing meeting with a Perth Mint sales representative, something along the lines of, “Sure, we can make pocket change for your people. Not a drama. Making money’s what we do at Perth Mint!” Then the well-dressed sales rep leans forward, lowers his voice a little, and says, “And when I say making money’s what we do, I don’t just mean minting money. I mean, minting. Money.” Intrigued, the Prime Minister asks for clarification, some glossy brochures are exchanged, and next thing you know Tuvalu's GDP doubles… However, this poses some philosophical questions:
  • Can anyone with 10+ square miles of land call up Perth Mint and hash out this kind of deal? (Actually, Tuvalu is already like 12 times bigger than Monaco…)
  • Are disc-shaped bits of silver really all that different from real silver coins if the only difference is a nation's blessing?
  • How are profits divided between Perth Mint and Tuvalu? Perth Mint provides the refining services, the bullion itself, all the design and minting work, distribution and marketing, and it seems like all Tuvalu does is sign a paper or two…
  • If there’s money to be made, are we going to see even more microstates pop up and get in on the business?
But there's more...

The even more curious case of Palau

We obviously can't say the name of the company, but we stumbled upon a bullion vendor with a large inventory of unusual silver coins. The company is strange. Most sovereign mints we’ve worked with are pretty straight-forward: they don’t let just anyone become official distributors. They’re picky, but you can work with them. These people are different. Suffice to say, you aren't getting those coins easy. The coins themselves, well, they look good and have an accreditation with the Numismatic Guaranty Corporation. They're not only silver coins, but rare and limited-issue coins. You know, the kind of stuff that drives collectors into a frenzy. Where do they come from? The island nation of Palau, as you might have guessed. This nation has some similarities with Tuvalu: a population of just above 18,000, a sovereignty declared in 1994 and 466 kilometers of land total. (That’s about the size of the park where I enjoy trap shooting and sporting clays.) Palau seems to be even trickier. It not only sells its sovereign coins to bullion vendors that presumably give them a lucrative offer for exclusive distribution, but also leases mintage to a variety of world mints. That's right: many of their coins are minted in one of several European nations. (If only the U.S. Mint thought of lessening the silver shortages in recent times by contracting, say, Valcambi to do the heavy lifting for them...) Okay, so what’s the big deal? Tiny (and often desperately-poor) island nations are making bank, mints are cranking out really nice coins – everyone’s happy, right? Who’s getting hurt here? Well, honestly, the difference between a silver coin and a silver round should be more than a face value and a portrait of the queen on one side. Sovereign coins are meant to represent a nation’s hopes and ideals – the face they want to show the world. (That’s why Lady Liberty is so prominently displayed on both American gold and silver eagles.) The British Britannia boasts the queen and the Lady Liberty of the UK. The Canadian maple leaf, well, Canada has more trees than people, so… Coins are symbols of a nation. Historically (and even today, in most places) that means something. When you see something like this: …you’re left wondering, What is the nation of Palau trying to say with these coins? The only message I’m seeing is, “Buy now.” Your mileage may vary. Perhaps you aren’t as much of a curmudgeon as I am. (I didn’t even want to sell cartoon coins…) Listen, if you’re psyched by these unusual coin shapes and weights, and you want to buy them, more power to you. That's one of the many reasons why coin collecting is fun even as a spectator's sport.