From the Super Mario Wiki, the Mario encyclopedia
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The Special Coin is a recovery item. Upon being used, it will remove all bad conditions from the user's kart, such as square tires, burst tires, or Thunder Cloud. In addition, the Special Coin provides a shield for approximately half a second upon being used. With good timing, this can be used to block incoming items or be immune to the explosion of a Time Bomb.
In Mario Kart Arcade GP, a variant of the Special Coin known as the Special Coin+ can be unlocked. This variant greatly increases the duration of the shield the item provides.
The Special Coin's appearance differs depending on which Mario brother it belongs to - Mario's Special Coin is gold in color and bears the letter M, while Luigi's Special Coin is silver in color and bears the letter L.