Where have all the 50,000 won bills gone?

Stacks of 50,000 won bills / Yonhap

By Yoon Ja-young

Fifty-thousand won bills, Korea's largest cash denomination, are disappearing. Many are believed to be held by individuals amid uncertainties over the economy.

According to the Bank of Korea, 6.32 trillion won worth of 50,000 won ($45) notes were issued in the first quarter of this year. However, the 50,000 won bills that have been collected by the bank during the same period stood at a mere 1.29 trillion won, approximately 20 percent of the total supply. The first quarter figure fell further from the figure for the whole of last year, when only 6.99 trillion won out of 25.22 trillion came back, recording a 24-percent return rate.

The central bank has been increasing issuance of the bills on growing demand, but it still seems to fall short. Those who try to withdraw 50,000 won notes from ATMs often end up receiving 10,000 won notes instead.

The central bank estimates that the COVID-19 pandemic has pulled down the return rate.

“Unlike during previous financial crises, the pandemic has decreased face-to-face transactions, such as in restaurants, lodging or leisure services. Sluggish business has had a negative impact on the return of 50,000 won notes,” the central bank explained in a report. With two-thirds of self-employed entrepreneurs reporting that they put their cash into banks and other financial institutions, before the pandemic, these small businesses were a major channel for bills to circulate back into the central bank.

Increasing demand for 50,000 won notes for the purpose of cash hoarding is another reason for the disappearance of the bills, according to the central bank, which cites economic uncertainties and historically low interest rates as reasons. There is not much motivation for people to put their money in savings accounts. Some affluent families keep cash and regularly give it to their children in order to avoid gift and inheritance taxes.

The increased holding of 50,000 won notes in households is reflected in the sales of safes. According to Hyundai Department Store, sales of safes for home use jumped 43.8 percent at its stores around the country in January from a year ago. Shinsegae Department Store also reported a 40.6-percent increase in safe sales during the same period.

The lifespan of paper money has also increased due to the decreased use of cash overall. According to the central bank, the lifespan of 50,000 won notes was 174 months last year, up 12 months from a year ago. 5,000 won and 1,000 won notes, which are more frequently used, have a product life of 60 months, and 10,000 won notes have a lifespan of slightly over double that, at 130 months.