Iceland Krona (ISK)

What Is the Iceland Krona (ISK)?

The Iceland krona (ISK) refers to the official national currency of Iceland. The krona is represented by the symbols kr and Íkr and is abbreviated as ISK in the international currency market. The currency is issued and managed by the Central Bank of Iceland. The krona was established in Iceland in 1918 when it was separated from the Danish krone. Coins were first issued in 1922.

Banknotes are printed in denominations ranging from 500 kr to 10,000 kr while coins are minted in value from one kr to 100 kr. There are no currency pegs related to the Iceland krona.

Understanding the Iceland Krona (ISK)

Iceland's national currency is the krona. Banknotes are printed in 500 kr, 1,000 kr, 2,000 kr, 5,000 kr, and 10,000 kr. Coins come in one kr, five kr, 10 kr, 50 kr, and 100 kr denominations. A single krona is divided into 100 aurar—the singular of eyrir. Coins were valued in five, 10, and 50 aurar but were taken out of circulation as of 2003.

The tiny island nation's central bank is responsible for issuing and maintaining its value. Established in 1961, the Central Bank of Iceland (known domestically as Sedlabanki Islands) has the sole right to print and manage banknotes. The bank transferred the responsibility to mint coins to the bank from the National Treasury in 1967. Iceland's central bank is also responsible for maintaining the country's monetary policy and financial stability.

Although Iceland is part of Europe, it is not a member of the European Union (EU). As such, it does not use the euro. The country's Krona floats freely on currency markets, which means the krona isn't pegged to any other currency and no other currency is pegged to it.

History of the Iceland Krona (ISK)

Iceland was once a territory of Denmark. The Danish krone was first introduced to Iceland in 1874 when it replaced the earlier currency, the rigsdaler. Iceland started printing its own version of the new Danish krone in 1885. But that changed after World War I when Iceland received autonomy from Denmark. In 1918, the government began issuing Iceland krona, which was used separately from the existing Danish krone. The country issued its first coins in 1922.

Responsibility for issuing and maintaining the Iceland krona was assumed by the country's central bank after it was established by the federal government in 1961. As noted above, the minting of coins was transferred in 1967 to the National Treasury.

The currency was revalued in 1981. Coins were officially taken out of circulation as of 2003 and are no longer considered legal tender. The krona has earned the nickname Icelandic Crown in the financial markets because of the word krona's relation to the Latin word for crown.

Iceland's Currency Crisis

While much of the world experienced a severe recession in 2008 following the housing market collapse in the United States and a more general worldwide credit crunch, Iceland's economy took a particularly hard hit.

When three of its primary banks went under in 2008 due to bank runs and an inability to finance short-term debts, it led to a nationwide economic slump. This was accentuated by the size of its economy and population. In fact, the 2008 crisis was the largest ever recorded relative to its size.

Prior to 2008, the krona traded in a corridor of around 75 kr to 85 kr per euro. By September 2008, the currency lost more than one-third of its value against the euro, while inflation reached nearly 15%. By October, the krona collapsed, falling to more than 300 Ikr per euro.

Currency trading was soon suspended and Iceland was forced to obtain emergency funding from the International Monetary Fund (IMF) as well as from a range of European countries in November 2008. Currency trading in ISK remained restricted in many places until the mid-2010s.

The bailout and stabilization package did work out for Iceland. Its economy has been growing since, and its currency has stabilized and held steady. As of May 17, 2022, one U.S. dollar was equal to 131.35 kr.