When the term first made it into the mainstream media, about 6 years ago, to describe the rise of anti-cash regulations, it was hard to predict the international snowballing effect that would today establish it as one of the most powerful monetary policy waves in modern economic history.
At first, national governments started gently “nudging” citizens to embrace more modern and convenient alternatives, initially by transitioning state-related payments and services, like tax collections and welfare payments, into the banking system. Soon thereafter, they also began placing restrictions on cash transactions. Starting in 2011, Spain and Italy outlawed cash transactions over certain limits, €2500 and €1000 respectively, then Belgium and Portugal followed suit and France reduced the limit from €3000 to €1000 in 2015, while Germany, to the public’s great displeasure, announced plans to ban cash payments of more than €5000. As shown in the chart below, the regulatory wave effectively swept through Europe and soon became the “new normal”.
In the meantime, Norway’s biggest bank DNB called for a total ban on cash, while Sweden’s plan for a cashless society, meant that now in more than half of the branches of the country’s largest banks, no cash is kept on hand, nor are cash deposits accepted. However, the term “war on cash” was really catapulted into the headlines this February, when ECB President Mario Draghi announced his plans to scrap the €500 note. The very next day, Harvard economist and former Secretary of the Treasury, Larry Summers called for the elimination of the £50, the €500, the Swiss CHF 1,000, as well as the $100.
Official narrative vs. Counter-narrative
The reason given for the escalation of governmental efforts to restrict or, indeed, outlaw cash transactions is the same in all of the above-mentioned cases: cash is the ”instrument of choice” for terrorists, drug lords, money launderers and tax evaders; law-abiding citizens have no real use for it anymore. With the rise of credit and debit cards for everyday payments, online banking and wire transfers for large sums, all being embraced as modern alternatives to cash, the average citizen is now actively being encouraged to abandon physical currencies and digitalize all their transactions, for the sake of transparency. In other words, the official narrative, reading between the lines, roughly translates to “you have nothing to fear, if you have nothing to hide”.
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