The Rich History of Paper Money in Iceland

Banknotes have been issued in Iceland since 1778, but in that year Danish Courant banknotes with Icelandic text on the reverse were legalized. In the nearly 250 years that have passed since then, a total of 71 different banknote editions have seen the light of day in Iceland, issued by eight different banks or official bodies.

The first bank to be established in Denmark was the Kurantbanken (The Courant Bank) in Copenhagen, a privately owned bank that began operating in 1736 and issued its first banknotes a year later. The bank was nationalized in 1773 and forty years later it closed its doors for good.

Five years after the state acquired it, in 1778, by a royal decree of April 22nd, 1778, Danish Courant Banknotes of the denomination 1 and 5 'rigsdaler' were legalized for use in Iceland with the prerequisite that an Icelandic text was printed on the previously blank reverse. The Icelandic text stated the notes validity in Denmark, Norway, and its duchies at the time (Schleswig and Holstein), as well as in Iceland (the country had been – for better or worse –

under the control of the Crown of Denmark since 1380). The Icelandic text was undated with the earliest recorded host note dated 1777.

The Courant banknotes are not thought to have been much used in Iceland though, since trade was still restricted by a Danish monopoly of ill repute when they appeared. In all likelihood, Icelanders in those times would have preferred, by habit, to trust in barter arrangements or in weighed precious metals. And it turned out they were right; the Courant Banknotes did not prove trustworthy in the long run.

Upon the collapse of the Danish currency in 1813 the Courant Bank became insolvent and the Courant notes practically worthless. A new state bank, the Rigsbank, was founded and given the sole right to issue notes. By a royal decree, the Rigsbank notes were validated in Iceland from March 20th, 1815. One riksbankedaler in 1815 had Icelandic inscription on the back of a Danish note from 1814. After the Danish Rigsbank notes with Icelandic validations were recalled from circulation in 1820, and up until the time that the National Treasury of Iceland (Landssjóður) issued its first banknotes in 1886, there was no currency specifically identified for use in Iceland, and mostly Danish banknotes were used instead with minted coins.

The National Bank of Iceland (Landsbanki Íslands)

Under a law passed in 1885, the newly founded National Treasury of Iceland (Landssjóður) was permitted to issue notes in its own name, which subsequently became the initial capital of Landsbanki Íslands (the National Bank of Iceland). The first Icelandic paper money was issued in 1886.

In the fourth article of the Banking Act, it said, among other things, that "nobody other than the National Treasury of Iceland is allowed to issue banknotes in this country. The notes can be exchanged for other notes in the National Bank of Iceland, but also for coins, depending on what is available at the time."

The notes were designed and printed in Denmark. They had a picture of Christian IX, King of Denmark, on the front, but the reverse of the 5 krona and 10 krona banknotes was blank. The reverse of the 50 krona note has a picture of The Lady of the Mountain, a female incarnation/national personification of Iceland. Only one copy of the 50 krona note is known to be privately owned in Iceland.

The look and design of the banknotes was according to a royal decree issued on May 20, 1886, which read as follows:

"The letters I. L. are watermarked in the paper on which the notes are printed. On both smaller sides of each banknote, the paper strip is uncut and the edge is therefore uneven. On the front of each note on the left is a bust of His Majesty the King; there, the Icelandic value of the banknotes is printed in black letters, and the number is replaced by letters. Underneath, in black letters, are the words: 'Issued according to law Sept. 18. 1885. For the National Treasury of Iceland,' and here the Governor of Iceland signs his name. One of the bank officials also writes his name on each note. The number showing the value of each note is printed on the top and in the right-hand corner. The color of these numbers and various ornaments found on the banknote, as well as the base color of the banknotes, is brown on the 50 krona banknotes, blue on the 10 krona banknotes, and gray on the 5 krona banknotes. There is nothing printed on the back of the 10 and 5 kroner notes; but on the back of the 50 króna notes, there is a woman's portrait and the number 50 printed on both sides inside an ornament. Finally, each banknote has its serial number printed in two places."

By the middle of July 1886, Landsbanki Íslands had lent about 40 thousand krona, but there were loan applications for five times that amount. At that time, only the 10 krona notes had been used, but thirty thousand copies had arrived by mail ship to the country, i.e., 300 thousand ISK of the 500 thousand that the bank was allowed to have in its possession. The reason for that was said to be that the Governor of Iceland and the bank managers, who had to sign the bills, had not had time to do so due to other obligations, i.a. national administration and parliamentary duties. It was said that at full capacity, they could only sign one thousand notes a day. According to rumours at the time, the Governor himself wrote particularly slowly. This bottleneck continued to exist, and even a year after the bank began operations, it was said that people had difficulty getting a loan in the last few weeks because there were not enough signed notes available.

The banknotes of Landsbanki Íslands were recalled in 1909. The second issue of notes from The National Treasury of Iceland (Landssjóður) was put into circulation on 25 July 1907 and was special in that the 5 krona note and the 10 krona note had a picture of King Christian IX on the front, while the 50 krona note, however, had a picture of King Frederick VIII on the front. It is interesting, and perhaps amusing, that all Icelandic banknotes up to 1931 had a picture of Danish kings on the front, but pictures of Danish kings have never been used on Danish banknotes. Only two unpunched copies of the 50 krona note from 1907 are known among collectors, and it is probably the rarest Icelandic note in history overall. However, the rarest Icelandic banknote is undoubtedly the 10 krona note from the third issue of the National Treasury of Iceland, with six small numbers (serial number) and a handwritten signature. Only one copy of this note is known to be in private ownership.

The Bank of Iceland (Íslandsbanki)

In 1904 a private bank, Íslandsbanki (Bank of Iceland) was founded, with mainly foreign investment capital. The first description of the future banknote issue can be found in March 1904, when it was reported in the Danish newspaper Dannebrog that the King had approved proposals of the contraversial Iceland's minister, Peter Alberti, regarding the design of the banknotes, shortly before the minister retired:

"After an extremely fierce competition, the preparation of the banknotes was entrusted to L. Levison junr. in Copenhagen, an agent of a well-known company, Giesecke & Devrient in Leipzig. The main deciding factor was that Giesecke & Devrient provided the most solid guarantee available to ensure that it would be impossible to forge the notes. They say they have printed hundreds of billions' worth of banknotes for various countries, both here on the continent and elsewhere, and no banknote from them has ever been forged; a result that hardly any other company in the world has achieved. It will, therefore, be highly unlikely that the banknotes can be counterfeited. All imaginable precautions are taken. Among other things, the notes are made in such a way that they cannot be photographed, and the extremely expensive guilloche machines used to print them are made specially for Giesecke & Devrient. This is all very unfortunate for counterfeiters. But it's good for everyone else that there will never be anything but unfalsified Icelandic banknotes."

The initial issue of Íslandsbanki banknotes in 1904 consisted of denominations of 5 krona, 10 krona, 50 krona, and 100 krona. All banknotes featured a portrait of the King, and the higher-value notes also depicted the mountain Hekla, thought in the Middle ages to be a gateway to Hell, and the famous hot spring Geysir. The notes with lower value were considered too small for such decorations on front. The reverse side of the banknotes featured an image of a majestic gyrfalcon, Iceland's national bird. “They will also all be adorned with richly designed, interlaced spirals. They are called guilloche in french. The watermark l. B. (i.e. Íslands banki) will be embedded in the paper, with dark letters and white white." An Icelandic newspaper expressed satisfaction with the design, but added that "hopefully these notes will be nicer and cleaner in design than the new stamps."

The Íslandsbanki commenced operations in June 1904 and was granted a 30-year authority to issue gold-backed banknotes. The gold standard was originally for ¼ of all notes in circulation but that was changed later on to ¾ of notes in circulation. This arrangement effectively made Íslandsbanki the de facto central bank of Iceland until 1927 when Landsbanki Íslands assumed that role.

On the day Íslandsbanki opened, June 7, 1904, it issued four kinds of paper money, 5 krona, 10 krona, 50 krona and 100 krona. The initial banknote issue amounted to ten million Icelandic krona at that time, but the bank was allowed to have only a quarter of that amount in circulation. The cost of designing and printing the banknotes at Giesecke & Devrient was 50 thousand ISK at the time, which was considered expensive. To manage the cost, the bank opted to create a large reserve upfront and then recall worn-out banknotes and replace them as needed. It is worth noting that the company Giesecke & Devrient is still in operation and prints paper money for various nations.

The new Íslandsbanki banknotes were extremely elaborate in their design by the standards of the time and immediately highly regarded by Icelanders. Many people eagerly exchanged their Landsbanki notes for Íslandsbanki notes, appreciating the look and quality of the new paper money.

Only ten days after the bank began operations, the Reykjavík newspaper Bjarki wrote that "the bank notes of the joint-stock bank are now circulating around town and they are very carefully made, beautiful and the paper is strong." And as the months went by and people gained more experience with the notes, their satisfaction remained undiminished. A columnist wrote the following autumn, 'Not only are the Íslandsbanki notes equally guaranteed as the Danish notes, but their quality is superior and they are significantly more challenging to imitate or counterfeit.'" The Íslandsbanki notes were valid in Iceland until 1940.

In 1919, due to a shortage of Íslandsbanki banknotes, the bank's management, with the permission of the Icelandic Government, decided to overprint 5 krona notes from the first edition of the National Treasury of Iceland (Landssjóður) with a 100 krona value. This was convenient in many ways, since the reverse of the 5 krona note was blank, and all the text on its front was overprinted. A total of 15,000 such notes were issued and remained valid until they were recalled along with other Íslandsbanki notes in 1940. Íslandsbanki also issued new 5 krona and 10 krona banknotes in 1920, which were designed and printed in Germany as before.

Íslandsbanki encountered financial difficulties and ultimately went bankrupt in 1930, mainly due to the consequences of the Wall Street Crash of 1929 and the Great Depression. Following the bankruptcy, Landsbanki Íslands assumed responsibility for all of Íslandsbanki's banknotes. The Íslandsbanki notes, including the 5 krona and 10 krona denominations issued in 1920, remained valid until 1940. At that point, the banknotes were recalled and replaced.

New banks, new era

Due to the lack of coins in Iceland in 1920, it was decided to issue 1 krona notes. This practice continued until 1925, but in 1922, two small coins were minted: 10 eyrir and 25 eyrir (eyrir is an Icelandic monetary unit worth one hundredth of a krona). Other denominations were minted until 1926, including a 1 krona coin and a 2 krona coin in 1925.

Following the Sovereignty Act of 1918, the National Treasury of Iceland (Landssjóður) was renamed without any change in its role. In 1925, it issued 5 krona, 10 krona, and 50 krona notes, which entered circulation the same year. Their design was very similar to the third issue of the Landssjóður, as well as the paper money issued by Landsbanki Íslands between 1929 and 1931. The bank also issued a 100 krona note in 1929, in accordance with laws from 1927. This marked the end of the issuance of Icelandic paper money designed and printed in Denmark and Iceland. After that, banknotes were designed and printed in Iceland and the UK, and Icelandic paper money continued to be printed in the UK until the turn of the century in 2000.

In 1957, Landsbanki Íslands was divided into two independent sections: the commercial bank with the same name as before, and a central bank named Seðlabanki Íslands. In 1961, the Central Bank of Iceland (Seðlabanki Íslands) was founded as a separate institution with the rights and obligations of issuing banknotes. The former bank issued paper money that was put into circulation in 1960, including 5 krona, 10 krona, 25 krona, 100 krona, and 1000 krona notes, but the first issue of Seðlabanki Íslands went into circulation from 1963 to 1971. In 1981, the Icelandic krona was revalued, due to high inflation, with 100 old krona being worth 1 new krona, and a new 500 krona banknote was first put into circulation in 1981. The 1000 krona was put into circulation in 1984 and the 5000 krona in 1986. The 2000 krona banknote was put into circulation in 1995 but never became very popular. The 10,000 krona banknote was put into circulation in 2013 and it is generally believed that it will be the last banknote which the Central Bank of Iceland will issue. Laws and regulations regarding the bank have undergone several changes since its establishment, most recently in 2023.

It is safe to say that the printing of paper money has been revolutionized since the issuance of the first Icelandic paper money at the end of the 18th century. The future of banknotes in Iceland, as in the world in general, is uncertain. However, it is beyond doubt that the nearly 250-year history of Icelandic paper money is extremely interesting, and their design throughout that period reflects both immeasurable beauty and rigorous contemplation from those involved in their creation. It is a rich history indeed.