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The World without Cash

In February 2016, EU finance ministers called on the European commission “to explore the need for appropriate restrictions on cash payments exceeding certain thresholds” and called for increasing engagement with the European Central Bank to take appropriate measures to steadily cut down on the supply of high denomination notes, in particular the Euro 500 note”. It may be mentioned here that the Euro 500 note, worth around £389 at current rates, is one of the highest-value banknotes in the world, along with the Swiss 1,000 franc note (£707). However, many experts have called for the scrapping of the note as trading and conducting transaction in such huge denomination provides a safe avenue for terrorists, money launderers and drug barons.
According to Peter Sands, former director at Standard Charter, Criminals move more than $2tn (£1.4tn) around the world each year, corrupt payments amount to $1tn and tax evasion robs countries of up to 70% of their tax income, and eliminating Euro500, $100, SFr1,000 and £50 notes would scrap a method of payment favored by such elements. Scrapping high-value notes would not completely eliminate crime and corruption would rather increase criminals’ costs of crimes and make them easier to identify, Sands argues.
A section of the economists have advocated a cashless society and regard these policy moves as a nascent stage towards the establishment of a cashless world. In early 2015, it was reported that Spain had already limited private cash transactions to 2,500 Euros. Italy and France set limits of 1,000 euros. In France, all cash withdrawals in excess of 10,000 Euros in a single month must be reported to government agencies. In the U.S., such limits are $10,000 per withdrawal. China, India and Sweden are among those with plans under way to eradicate cash.
On April 20, 2015, the Mises Institute reported that Chase, a subsidiary of JPMorgan Chase and a bailout recipient of some $25 billion had announced restrictions on its customers’ ability to use cash in the payment of credit cards, mortgages, equity lines and auto loans. Before that, on April 1, 2015, Chase, in concert with JPMorgan, updated its safe deposit box lease agreement to provide, “You agree not to store any cash or coins [including gold and silver] other than those found to have a collectible value.”
The war on cash unquestionably has extended from government into the private banking sector. These developments with respect to monetary policy in the West have led a section of economists ponder over the question whether the mega-banks are promoting a cashless society. Advocates of a cashless society argue that apart from checking financial crimes, such a society would also be time-saving Moreover; such an operating mechanism would also offer security benefits to the users. Digital payments indirectly reduce expenditure in manufacturing currency notes and its transportation.
For developing economies, too cashless societies would also bring about a host of benefits. For example, Nandan Nilkeni estimates that in a cashless India, the estimated savings from such a model are enough to boost the country’s welfare spending by 25 per cent, or increase the per capita income of every poor household in India by 15-20 per cent. However, there are sceptics of a cashless society as well. They argue that electronic transactions could increase surveillance. Rainey Reitman, activism director at the Electronic Frontiers Foundation, based in San Francisco remarks, such forms of cashless transactions would create a trove of data on which the general public would have no control. This implies that all invisible debits and credits could be tracked. Fears are further allayed that confiscation will be a simple matter of pressing a button when the system is in complete control of transactions.
by Dr. Ankit Srivastava

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