Seigniorage is the economic return associated with issuing money. It can mean a coin’s face value less its issuance costs, income from assets financed by banknotes, or purchasing power obtained by creating new money. It therefore does not automatically equal a central bank’s accounting profit, a cash holder’s loss or a payment to the government budget.
The US Mint produces American coins. Its 2021 annual report compares the face value of circulating coins issued with their costs, including metal, manufacturing and transport. Consider our own example: a coin is worth 10, but the full process costs 12. The result is 10 − 12 = −2. Issuing coins need not be profitable. This is not a current mint price list, just an illustration of the difference between the number on a coin and the cost of delivering it. The related term Debasement means a deterioration of money, historically including a reduction in precious-metal content. That intervention is a different question from measuring issuance income. [1]
For banknotes, the European Central Bank (ECB) describes another route: a central bank may issue notes by lending to a commercial bank or acquiring assets from it, such as bonds that can earn income. An issued note remains its liability, not revenue with no counterpart in the accounts. Imagine an asset worth 100 that earns 4 over a year, while operations cost 1. This simplified model leaves 3, not the note’s entire value less the paper. It measures annual income and expense, not the complete finances of a particular central bank. [2]
The banknote in your wallet earns no interest. Banks’ reserves held at a central bank, however, can earn interest that the central bank must pay. The Federal Reserve (Fed), the US central bank, explicitly distinguishes these costs. In another example of our own, annual asset income is 4, interest on reserves is 5 and operations cost 1: the result is 4 − 5 − 1 = −2. Monetary Base includes cash and bank reserves, so the whole base cannot be treated as free funding. Rising rates can raise liability costs faster than income from older assets. Continued issuance therefore does not rule out a loss. [3]
Alongside accounting results, economists ask how much purchasing power new issuance provides. In this approach, the International Monetary Fund (IMF) divides the increase in the money amount by the price level, an overall measure of prices. In our example, the base rises from 100 to 110 and the chosen price level is 2. We get (110 − 100) / 2 = 5 in real units. This measures a gross increase expressed in purchasing power, not accounting profit. It is before costs and does not mean society gained the same amount of net wealth. New numbers in accounts do not manufacture goods by themselves. [4]
Now consider someone holding 100 in non-interest-bearing cash. At a price level of 1, the real balance is 100; at 1.1, it is about 90.91. The notes remain, but buy less. This effect is called the inflation tax, even though no tax bill arrived. Our example alone does not identify who received an equal amount. The IMF decomposes Seigniorage into a change in real balances and an inflation component. With unchanged real balances, the measures coincide under the conditions of that decomposition; in general, they differ. They ask different questions: income from issuance and the loss of purchasing power of money already held. [4]
Issuance income is not automatically passed to the state in full. Costs, financial results and distribution rules matter. In its July 2026 report, the Fed notes that net income and remittances are calculated for individual Reserve Banks, the regional components of the US central bank. A bank that has accumulated losses records a deferred asset: an accounting item that future earnings must first offset before remittances resume. This item is not itself a payment from the Treasury. One bank can therefore be sending money while another is still offsetting past losses. [5]
People decide not only what to spend but also how much money to hold. The IMF decomposition permits positive Seigniorage without inflation when desired real balances grow. Rapid price increases can work the other way: people try to exchange domestic money for goods or other assets sooner. That shrinks the base on which the inflation tax falls. In the extreme case of Hyperinflation, exceptionally rapid inflation, this issue is especially important. Faster issuance therefore does not guarantee a larger lasting real return. An accounting relationship alone does not tell us how prices and people will respond. [6]
Bitcoin also issues new units, but has no state issuer passing the proceeds to a budget. Its whitepaper, the original description of its design, distinguishes newly created coins from transaction fees. Block Subsidy is the new bitcoin (BTC) issued in a block, whereas a fee transfers existing BTC from the sender to a miner. A miner is a participant whose equipment searches for the proof of work needed to add a block. The total reward is the miner’s gross income; profit can be discussed only after deducting electricity, equipment and operating costs. If someone uses Seigniorage in connection with mining, we need to know which quantity they are comparing. Similarity in issuing new money does not mean identical accounting or an identical recipient. [7]
For the clearest picture, read this entry together with Monetary Base, Debasement, Hyperinflation, Block Subsidy. The reverse links also lead from Debasement, Hyperinflation.