Banco de Portugal : DAC SmartSort

DAC SmartSort – Smarter Sorting for Deliberately Altered Coin Detection is a Banco de Portugal in-house initiative designed to make automated coin sorting smarter, more accurate and more resilient in detecting deliberately altered coins. Built on Banco de Portugal’s internal expertise, technical know-how and operational experience, it enhances the performance of both coin sorting equipment and public coin deposit machines used across the Bank’s network.

Deliberately altered coins (DAC) are genuine euro coins that have been visibly affected by processes such as waste incineration or metal recycling. Since these coins should not be reimbursed or returned to circulation, DAC SmartSort helps ensure they are efficiently identified and removed from the cash cycle, protecting the public from being affected by coins with no reimbursement value.

To address this challenge, Banco de Portugal carried out a detailed profiling of DAC coins found in Portugal, analysing the physical and chemical changes resulting from the processes to which they had been exposed. This data was then used to exhaustively fine-tune the sorting parameters of existing equipment, enabling the machines to identify the specific characteristics of MDA coins and segregate them from coins fit for circulation.

The solution was deliberately designed to maximise impact without increasing investment or operating costs. No hardware or software upgrades were required, and the project was implemented without increasing the rejection of fit coins during deposit processing. With highly positive results, DAC SmartSort is currently implemented across Banco de Portugal’s coin processing centres, strengthening euro protection while preserving efficiency and reliability.

DAC SmartSort was developed in-house by Banco de Portugal, leveraging internal expertise, technical know-how and operational resources.

DAC SmartSort has only been implemented in Portugal at this stage.

DAC SmartSort has already impacted the Portuguese coin cash cycle by addressing a problem that became increasingly relevant in Portugal, as in other European countries: the presence of large volumes of deliberately altered coins entering or at risk of entering circulation. The amount of this material that has been seized and/or stored (several tonnes) allows us to estimate that a significant number of coins have reached circulation, particularly between 2021 and 2023, creating a clear need for a more effective operational response.

The project’s impact lies precisely in its ability to remove these coins directly from circulation. In Portugal, a significant share of the coins reaching Banco de Portugal originates from public coin deposit machines available across its own branch network. By improving the detection of DAC in these machines and in back-office coin-processing equipment, DAC SmartSort acts at every entry point into the central bank’s coin-processing workflow. Once detected, these coins are segregated and transferred to the operational headquarters, where it is ensured that they will not return to circulation.

Results observed in the first semester of the year already allow Banco de Portugal to project, at this stage, an increase of around 40% in the number of DAC removed from circulation by the end of 2026 compared with the previous year. By enhancing detection performance, the project is actively helping to clean Portugal’s metallic coin circulation by removing coins that should not return to the cash cycle.

Its broader impact is further reinforced by the low-disruption methodology. Since the solution requires no hardware or software investment and does not increase the rejection of fit coins, it offers a realistic pathway for adoption by CIT companies, with discussions already underway with these stakeholders. This would significantly extend the project’s impact beyond the central bank’s own operations.

The roll-out of DAC SmartSort was quite smooth and efficient.

The solution was developed to enable a turnkey deployment to the teams responsible for each machine across Banco de Portugal’s branch network. Given the operational pressure on front-office services, any implementation model requiring longer interruptions or complex local interventions would have been difficult to accommodate.

During development, we undertook a comprehensive profiling of each DAC type, combining laboratory measurements of every coin with readings obtained directly from sorting equipment. Each adjustment to machine parameterization aimed at improving the detection of DAC-specific characteristics was followed by an exhaustive verification of the fit coin rejection rate.  In practice, this meant processing up to ten thousand genuine and fit coins for each iteration, ensuring that every gain in DAC detection was not offset by an increase in the rejection of coins suitable for circulation.

This exhaustive verification process allowed the roll-out to be both fast and scalable across all equipment types, including public deposit machines and back-office sorting equipment.

Every machine updated with the new sorting parameters was out of service for no more than one hour and subjected to immediate on-site validation and intensive monitoring over the subsequent 30 days.

As expected, only slight adjustments were required across the equipment, taking into account component mechanical wear, sensor service life and sensitivity, usage history, calibration conditions and the small internal asymmetries specific to each machine.

DAC SmartSort was conceived as a lasting operational improvement, not simply as a one-off adjustment to machine settings. Its resilience comes from the fact that the methodology was tested in real operating conditions, across both back-office coin-sorting machines and public coin deposit machines. This confirmed that the approach could be applied consistently across Banco de Portugal’s branch network, while still allowing for the small adjustments naturally required from one machine to another.

The post-implementation validation was a key part of this resilience. After the 30-day monitoring period, all updated machines were tested again using DAC reference kits and genuine fit coins. This confirmed that the improved detection capability had been maintained over time and that the higher DAC rejection rates had not resulted in an increase in the rejection of coins suitable for circulation. The solution therefore proved to be stable beyond the initial roll-out phase.

The initiative is also resilient because it does not depend on new hardware, software upgrades or complex external delivery cycles. Developed in-house and supported by Banco de Portugal’s own technical know-how, operational experience and understanding of its equipment, the solution can be maintained, adjusted and revalidated internally whenever needed. By relying on refined parameterisation of existing machines, DAC SmartSort is less exposed to procurement delays, budget constraints, supply-chain disruption or technology replacement risks. This is particularly relevant in crisis scenarios, as it can continue to operate within the existing infrastructure and normal coin-processing routines.

Finally, the use of DAC reference samples and genuine coin validation sets makes future revalidation straightforward whenever equipment is recalibrated, maintained or affected by changing operating conditions. If DAC profiles evolve, the same testing and adjustment methodology can be applied again, giving Banco de Portugal a practical and sustainable capability to keep removing deliberately altered coins from circulation.

DAC SmartSort is, in essence, the improvement of an existing process: automated coin sorting. Its uniqueness lies in the fact that it does not seek to replace current equipment, redesign operational flows or introduce an entirely new technological layer. Instead, it explores the untapped potential of the machines already in use, through an exhaustive understanding of their technical capabilities and a precise alignment of those capabilities with the specific needs of a central bank.

Traditional coin-sorting processes are designed to assess genuineness and fitness according to predefined operational parameters. DAC SmartSort builds on that process by refining it for a specific and relevant challenge: the detection and segregation of deliberately altered coins. This was achieved by studying the behaviour of DAC across different equipment types, identifying the characteristics that could be reliably detected by existing sensors, and translating that knowledge into improved or previously unused sorting parameters.

The initiative therefore represents a practical form of innovation by improving what already exists, without creating unnecessary complexity. By using current machines more intelligently, Banco de Portugal was able to increase detection performance while preserving the core stability of the existing process. The project also avoided the typical trade-off between stronger detection and higher rejection of fit coins, which is particularly important in a high-volume operational environment.

This is what makes DAC SmartSort distinctive. It is neither an off-the-shelf solution nor a simple technical calibration exercise. It is a targeted operational improvement, built on a detailed understanding of coin-processing equipment, genuine coins and DAC characteristics. In this respect, the project shows how meaningful innovation can result from refining existing processes with precision and a clear operational purpose.

DAC SmartSort contributes to a more sustainable coin cash cycle by making better use of existing resources. Instead of requiring new equipment, software or additional technological layers, the project improves performance by extracting greater value from machines already in operation. This enables Banco de Portugal to strengthen the detection of deliberately altered coins without affecting the overall environmental impact.

Its environmental relevance begins with the more effective removal of DAC from circulation. These coins have been exposed to aggressive physical or chemical processes before re-entering the cash cycle. Although DAC SmartSort is not a health and safety initiative, it may also help reduce potential handling risks associated with such material. By detecting and segregating these coins accurately, the project limits further contact by the public and by cash-cycle operators, ensuring that degraded metallic material is managed through controlled operational channels.

The project also supports a more rational use of metal resources. Because the sorting process remains accurate, coins suitable for circulation are not unnecessarily rejected, while coins that have lost reimbursement value are removed and handled appropriately. This approach is aligned with Banco de Portugal’s broader focus on reducing the environmental footprint of cash-related activities, namely by limiting unnecessary coin destruction, reducing the need for new coin production and promoting a more efficient use of raw materials.

Overall, DAC SmartSort is not an environmental project in the strict sense, but it delivers clear environmental value. It removes degraded material from circulation, supports a more efficient use of existing equipment and metallic resources, and improves operational performance without creating additional technological or infrastructure burdens.