A silver certificate is a paper document certifying that the holder owns the amount of silver mentioned on the certificate.
This gave the owner the flexibility to use the certificate as a form of payment, without having to carry around the physical silver underpinning it.
These certificates were legal tender and were used in a similar fashion to the paper money used today. Although these certificates were issued by countries including Cuba and the Netherlands, as well as by mints and bullion producers, the most widely known and traded form of silver certificates are those issued by the United States. These look similar to today’s $1 bills.
History of Silver Certificates
Silver certificates date back to the 19th century and came about following two key acts in US history. The first of those was the Coinage Act of 1873 which placed the US onto the gold standard, where the amount of money in circulation was backed by the equivalent amount of gold in the US Treasury.
This act caused an uproar among silver miners as up until that point they could present their metal at the Mint and have it struck into coins. However, by shifting to a gold standard, it brought to an end the era of bimetallism, in which both gold and silver were legal tender and could be minted in unlimited quantities, with the price of silver falling dramatically as a result.
A “free silver” movement was created, with its supporters known as “silverites”, which argued for the retention of silver as part of the US’ monetary standard. The Bland-Allison Act of 1878 represented a victory for the silverites as the act required the US Treasury to purchase $2 million to $4 million of silver each month from mining companies to be converted into silver coins. Silver was once again monetized.
A Medium of Exchange
This change in monetary policy also brought about the creation of silver certificates. These certificates made for a much easier means of exchange than having to carry around large amounts of silver. Each certificate was backed by the equivalent amount of silver held by the US Treasury and carried the words “One dollar in silver is payable to the bearer on demand”.
The first series of silver certificates ran from 1878 to 1923 and were much larger than today’s paper money. These were issued in denominations of $1, $2, $5, $10, $20, $50, $100 and $1,000. In 1928, the size of the certificates was reduced and they were only printed in denominations of $1, $5 and $10 until they were discontinued in 1964.
For the next few years, the certificates were still redeemable for physical silver until the 24th of June 1968 when all redemption ceased. The certificates remain legal tender today worth the value stated on them, however, the collector value outweighs the stated value.
In the Netherlands, a shortage of silver for minting saw the Dutch government introduce silver certificates in 1914 and these were used until 1938. In Cuba, silver certificates were issued from 1934 to 1949.
Understanding Silver Certificates
Silver certificates are the forerunners to paper fiat money used today. Rather than having to carry physical silver to make payments, each certificate was backed by the equivalent money held by the issuing government or mint. This one-for-one exchange mechanism was a cornerstone of monetary policy from its origins in the late 19th century until the US stopped producing the certificates in the 1960s.
While paper money is still used today, fiat currencies are not backed by an underlying commodity with central banks free to control the amount of money in circulation. Silver certificates were redeemable for silver dollars and while they haven’t been issued for almost 60 years, they remain popular with collectors for their historical significance.
The Value of Silver Certificates Today
Rarity and condition are the two key factors in the value of silver certificates today. The US issued certificates for over 80 years with a large variety of designs throughout those print runs.
Those dating back to the first issuances from the late 1870s and 1880s are rarer and typically are the most valuable as a result. The crisper the note, the more valuable it is too; those with no blemishes or folds, in perfect mint condition, are more likely to attract the highest value.
Other elements that will boost appeal among collectors are lower serial numbers or an unusual design. For example, while the certificates typically carry the image of famous US men, Martha Washington is the only woman to appear on a US silver certificate, first featuring in 1886, adding to collector value.
It is worth noting that the higher denomination certificates aren’t necessarily worth more than lower denomination ones with a rare $1 certificate potentially worth more than a relatively common $10 one. At the bottom end of the scale, the certificates are worth little more than the value printed on them while a rare certificate in mint condition can be worth a few thousand dollars and occasionally even millions.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.