Third-Party Grading: Is it a curse or a blessing for European numismatics?

The scene where the seven dwarfs admire Snow White in her glass coffin is one of the fairy tale's most emotional and impressive moments. The dwarfs placed Snow White in a glass coffin on a hill in the forest because her body, even in death, remained so beautiful and unblemished. The coffin is intricately designed and made of clear glass, allowing Snow White to be visible from all sides and admired at any time – a worthy resting place for "the fairest of them all."

In European numismatics, however, a transparent coffin is still considered by many collectors to be a coin's worst fate. They refer to the rigid plastic holders in which certification providers like the Numismatic Guaranty Company (NGC) or the Professional Coin Grading Service (PCGS) grade coins as "plastic coffins"—and some even break the coins out of the "slab."

I vividly remember a panel discussion that took place five years ago at the World Money Fair in Berlin. When Sam Spiegel (Director of International Numismatics at Heritage Auctions) and Michael Chou (owner of the auction house Champion Auction) accepted the invitation to participate in the special panel discussion as representatives of the international auction house industry, they probably knew it wouldn't be a cozy coffee chat. The discussion was centered around an innovation passionately debated and criticized in German-speaking numismatics: third-party grading, the technical term for the certification of coins by professional and independent providers, is making strides in the European market, but not without heavy opposition from German dealers and some collectors.

The panelists representing the German side wasted no time in letting their European colleagues know what they thought about grading, which was still a pretty new trend in Europe back then while being widely accepted in the U.S. and Asia. Christoph Raab, Managing Director of the well-established German coin dealership Dr. Busso Peus Nachfolger, made it clear, "If I cannot touch the coin, I cannot develop a passion." To him, a coin in a holder is downright dead and viewed merely as an anonymous object with a number. There's just some random piece of metal in there that's supposed to have value. I cannot develop any enthusiasm for that, Christoph Raab said. When his Asian counterpart Michael Chou highlighted that his customers want an independent opinion because there's always a suspicion that auction houses may exaggerate the condition of their material, Arne Kirsch (President of the International Coin Dealer Association IAPN – AINP) energetically disagreed: From his point of view, German auction houses always describe the pieces accurately. He acknowledged that when it comes to coins from the Middle Ages or ancient times, the dealer's experience plays a central role in the authentication process.

After an hour of constructive yet heated discussions, it was clear that the front line was located exactly at the linguistic border between the German and English-speaking markets. Even though both PCGS and NGC have been operating in Europe for several years (PCGS uses Paris as their base, while NGC recently relocated to a larger space in Munich, Germany) and both companies report strong growth, they face constant opposition. In a unique move, one of the important European dealer associations decided not to issue a guarantee for coins encapsulated in a grading holder – a bold statement because both the VDDM (Association of German Coin Dealers) and the IAPN/AINP pride themselves on issuing extensive guarantees for the authenticity of every coin sold. IAPN president Arne Kirsch called the guarantee of AINP members, who are fully liable as long as they live, better than anything else in the coin business. He and his German colleague, Christoph Raab, argued that there was no need for services from companies like NGC or PCGS in the German market, as the members of the dealer associations already provided extensive guarantees.

The panel discussion was watched with some embarrassment by many collectors who already favor the advantages of third-party grading and point out that the guarantees from grading service providers like PCGS or NGC are not tied to a dealer's lifetime but go far beyond. In fact, an active coin grading community has developed on social media in Germany and elsewhere in Europe, with people discussing their latest submissions and grading results, showing off on YouTube, and even organizing group submissions called Grading Challenges. The latest challenge saw 20 individual collectors, most of them grading for the first time, handing in a total of 150 coins with a combined value of around 40,000 euros. And Germany is still far behind other European markets like the UK when it comes to third-party grading. One of the most prominent stackers, London-based Numistacker, has already reached more than 10,000 subscribers, while the most important coin-grading group has around 500 members. But coin collectors like Numistacker face constant rants about coins in plastic.

Even five years later, many still talk about third-party grading as the future of numismatics, while others complain about coins in plastic, which they say are downgraded to an unknown number. There's hardly an innovation within European numismatics that is as passionately debated as third-party grading, the grading of coins by professional and independent third-party providers.

In recent decades, grading has become standard in the Asian and U.S. markets, and in Europe, companies like NGC (with an office in Munich and now a permanent bank note grading team on site) or PCGS (in Paris) have gained importance in recent years. However, in many corners of the numismatic world in Europe, the hard plastic holders and numerical gradings based on the Sheldon scale are still not accepted.

The fronts between proponents and opponents of third-party grading, where an independent expert from a commercial service provider grades the condition of a coin on a scale of 1 to 70 and encapsulates it in a hard plastic holder, remain hardened, and the same old arguments are still exchanged in Europe.

Here are just three examples:

Regarding "fraud protection," grading fans emphasize that the impartial opinion of grading experts provides the necessary certainty in an opaque market. Especially in Asia and the U.S., market experts fear a high proportion of counterfeits, causing many collectors to eventually give up out of fear of being scammed. For this reason, a "raw" coin is virtually unsellable on the Asian market because the potential buyer would immediately wonder what's wrong with the coin if it doesn't have a grade. Additionally, major grading providers guarantee generous compensation if they make a mistake in detecting counterfeits.

Experienced coin dealers and auctioneers, on the other hand, criticize hard plastic capsules because they hinder the detection of counterfeits. They argue that with coins in hard plastic holders, they cannot apply their skills and knowledge to detect counterfeits—such as examining the edge, sound, and weight. Indeed, there have been isolated cases where counterfeit coins have made their way into a grading holder.

"Touching fears" are also highly controversial in dealing with third-party grading: Collectors in Germany prefer to handle their coins directly and examine them up close. However, this can damage the coin because the fine acids on the skin can attack the metal's surface. In a grading holder, the coins are permanently protected and can still be examined up close.

Lastly, the major grading service providers must continually address criticism of their subjectivity. The companies themselves point out that their graders assess tens of thousands of coins each year and, therefore, have a broad spectrum for grading. Additionally, impartiality benefits both dealers and collectors by providing transparency. Some collectors accuse dealers and auction houses of grading their coins out of economic interest. However, NGC and PCGS are now multimillion-dollar companies competing for clients – and at the end of the day, it is coin dealers, auction houses, and collectors who pay for this service.

Nevertheless, grading is becoming standard not only in the U.S. and Asia but also in Europe – particularly in Eastern Europe, where historical commemorative coins from their own countries are increasingly seen as investments. In Western Europe, coins in hard plastic capsules are appearing more frequently in auction catalogs and sales lists.

In Europe, third-party grading serves as an entry point into numismatics for a unique target group that few have on their radar: the numismatic youth. Many young people exchange ideas on social networks and are also passionate coin collectors. For the next generation of numismatists or for collectors who see a numismatic rarity as an investment, grading is becoming increasingly standard in Europe. If this makes the market for rare collector coins sustainable, if dealers and auction houses make good money with the support of grading service providers – often significantly more thanks to grading – and if collectors can sell their coins at market-appropriate prices through grading, then third-party grading is likely to be unavoidable in Europe in the future.

More and more collectors in Europe are discovering third-party grading to preserve their collections from declining value and reveal the true worth of their coins. One example: Anyone who owns a few old coin magazines and looks through the offer lists from back then will be amazed – for instance, in 2000, a 5 DM commemorative coin "Germanisches Museum" in brilliant uncirculated condition was sold for 2,000 DM, roughly equivalent to 1,000 euros. Schiller, Markgraf, and Eichendorf were available for around 500 euros each. Today's prices: about 300 euros for the "Museum" and around 100 euros for the three subsequent BRD commemorative coins from the founding years of the Federal Republic.

Many former top rarities from German numismatic history, especially the German commemorative coins from 1952 onwards, are now available at affordable prices – unless they are in above-average condition and have been graded. More and more collectors are discovering the potential for value appreciation in their collections – a coin from the German Empire, Weimar Republic, or the Federal Republic can fetch multiple times its catalog value if it has a top grading and is thus more tradable on the global market. Many collections in Germany contain excellent pieces that, through grading, not only receive an internationally recognized grade but also achieve competitive international prices.

While it's always important to remember that grading doesn't automatically affect a coin's value, historical collectibles from German numismatic history show surprising value development prospects. One example: The 3 Mark coin "Bremerhaven" from 1927 with the mintmark "A" was auctioned in 2018 by coin dealers in brilliant uncirculated condition for 120 to 150 euros. Auction results in the U.S. for graded examples at Heritage Auctions ranged from 136 to 199 USD for "MS62," – so grading might not necessarily be worthwhile for value development.

However, starting at MS63, significant increases are observable: between 138 and 220 USD, for example, at Heritage in recent years. The higher the grading, the stronger the value increase: MS64 examples fetched between 176 and 282 USD, MS65 between 199 and 376 USD, and MS66 between 253 and 458 USD. The highest price was an MS67 example with a top bid of 544 USD.

It may seem curious at first glance that German coins fetch significantly higher prices on the international market than in their home country. However, many wealthy collectors in the U.S. with German roots want to own top-quality coins from their homeland and are willing to pay substantial premiums. Additionally, the German grading system, which generally only distinguishes between "very fine," "extremely fine," and "brilliant uncirculated," is not well-suited to precisely define a coin's condition – especially for uncirculated coins. A look at online auction platforms shows that terms like "brilliant uncirculated" are used almost inflationary for all sorts of conditions, which a reputable coin dealer or auctioneer would rate at best as "very fine" or "extremely fine."

Third-party grading opens up entirely new perspectives for knowledgeable coin enthusiasts, not only in terms of value development but also for the demand for their treasures. Selecting a suitable coin from the German Empire, Weimar Republic, or Third Reich for grading by a service provider like NGC requires profound knowledge and a keen eye for details. The problem is that there are no clearly defined grading standards for German coins like there are for U.S. coins – it is not yet definitively described what differentiates an MS64 from an MS65 German Empire three-mark coin.

However, the recognized grading standards for U.S. coins can be broadly applied to German coins. The number of contact marks on the coin's fields, the sharpness of details like the breast shield of the imperial eagle, and the fine contours of hair, noses, or ears of the empire's monarchs—these aspects help experienced coin collectors check their selections before submission.

German coin collectors should exercise great caution when checking their coins for potential flaws. Unfortunately, it is too common for historical coins sold on the German market to show alterations resulting in a "Details" grade during grading. These pieces can be sold as "brilliant uncirculated" at "brilliant uncirculated" prices, but in an NGC slab with a "Details" grade, even the most minor flaws become evident.

Collectors should pay particular attention to "hairlines" or any signs of improper cleaning. Some collectors exhibit remarkable creativity and experimentation when trying to spruce up their numismatic treasures. For such post-mint alterations to a coin's natural appearance, NGC graders show no mercy—the coin ends up in the "purple slab of death," a holder with a Details grade.

Third-party grading won't work miracles for German coins. However, more and more collectors see it as an opportunity to document their coins' actual value and rarity—especially for coins in top condition, of which there may be only a handful of examples worldwide. While these might get lost in the crowd in a German auction labeled as "brilliant uncirculated," the population report from grading service providers clearly establishes their status as sensational rarities.

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