The Icelandic króna

Who has issued Icelandic money

Several bodies printed Icelandic notes before there was a central bank. The Landssjóður Íslands issued 5, 10 and 50 krónur notes from 1885. The Bank of Iceland took over in 1904, the state treasury, Ríkissjóður Íslands, began its own notes in 1921, and from 1928 the Landsbanki Íslands issued everything from five krónur up.

The Central Bank of Iceland, Seðlabanki Íslands, got the sole right to issue notes when it was established in 1961, and its first notes were made in England by De La Rue. The right to issue coins passed to it from the National Treasury in 1967. Each note carries the date of the law its legal basis derives from: the notes of 1981 cite the law of 29 March 1961, and the reissues from 1994 cite the law of 5 May 1986.

How the króna split from the Danish krone

Denmark's krone reached Iceland in 1874 and replaced the rigsdaler. Iceland printed its own notes from 1885 while still using the Danish unit. The two separated after the Scandinavian Monetary Union dissolved at the start of the First World War and Iceland gained sovereignty from Denmark in 1918.

Iceland's first coins followed in 1922, 10 and 25 aurar pieces. So did a 23% devaluation against the Danish krone, the start of an independent monetary policy. The króna was pegged to the British pound from 1925 until the spring of 1939, and then to the US dollar until 1949. The coins carried a royal monogram until 1946, two years after Iceland abolished the monarchy it had shared with Denmark in a personal union.

Why the króna lost two zeros

Inflation drove the reform of 1981, when 100 old krónur became one new króna and the currency code moved from ISJ to ISK. New coins of 5, 10 and 50 aurar came with it, but they did not last. In September 2002 the government issued two regulations requiring invoices and financial claims to be stated and paid in whole krónur and withdrawing every coin worth less than one króna. Banks stopped accepting aurar coins from 2003, and the eyrir ceased to exist as a subunit in 2007.

What the coins and notes show

The central bank lists five coins as legal tender: 1, 5, 10, 50 and 100 krónur. Þröstur Magnússon designed them. Every obverse carries the guardian spirits of Iceland, and the reverses are sea creatures: a cod on the króna, two dolphins on the five, four capelin on the ten, a shore crab on the fifty and a lumpfish on the hundred, which entered circulation in 1995. The small coins moved from cupronickel to nickel-plated steel, the króna in 1989 and the five and ten in 1996.

The notes run 500, 1000, 2000, 5000 and 10,000 krónur, designed by Kristín Þorkelsdóttir with Stephen A. Fairbairn, and every one is watermarked with a portrait of Jón Sigurðsson. The 10,000 arrived in 2013. The bank no longer produces the 2000, though it remains legal tender.

How the banking crash reopened the currency question

The banking sector collapsed in October 2008. On 7 October the central bank tried to peg the króna at 131 to the euro and gave up the next day; trade in the currency was then suspended. A report from the Minister for Foreign Affairs in March 2009 weighed keeping the króna, adopting the euro outside the EU, and adopting it through membership, and recommended membership. The Alþingi voted narrowly in July 2009 to apply. The application has been frozen since 2013, and in March 2015 the government wrote to the Council of the EU that Iceland should not be seen as a candidate.

A second idea surfaced in 2012: adopting the Canadian dollar unilaterally. Canada's ambassador said Iceland could do so if it wished. A deputy governor of the central bank argued in January 2012 that it would be prudent only if Iceland's banks were owned by a strong foreign bank able to supply liquidity. As of 2018 the authorities had no plans to adopt a foreign currency.