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2022 in Review

Categories : Cash and Crises, Cash facilitates budgetary control, Cash has legal tender status, Cash is also a store of value, Cash is trust, CashTech
January 4, 2023
Tags : 2022 in Review, Access, Cash and Crises, CashTech
From pandemic to war, 2022 faced more than its fair share of shocks, demonstrating the essential role of cash for resilient monetary systems. More countries issued regulations to ensure future access to cash.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

Three key trends emerge:

January: The Afghani Cash Shortage and Humanitarian Catastrophe

Afghanistan direly needs physical cash to jumpstart its imploding economy. Four months after the Taliban took over Kabul, the Afghan banking system is on the brink of collapse. The U.S. administration froze Afghan reserves abroad and suspended air shipments of U.S. dollars to Da Afghanistan Bank (DAB), the country’s central bank, paralysing the banking system.

Afghanistan’s cash shortage resembles similar crunches in countries such as ZimbabweVenezuelaLebanonSyria, and Myanmar, experiencing political and economic dislocation, social instability, and humanitarian crises.

In October, Afghani media announced the arrival of new banknotes from overseas to replace damaged notes and address the liquidity crisis.

February: Facebook’s Diem Crashes to Earth

The Facebook-led Diem Association sold its assets, putting an end to the social media’s controversial ambitions in digital money and payments and a three-and-a-half-year battle with regulators and central banks across the globe.

Facebook announced its plan to launch Libra, later renamed Diem, in 2019, a stablecoin built on a tailored version of blockchain technology designed to let people shop and make low-fee money transfers globally. The new currency was initially tipped to launch in the first half of 2020. Libra aimed to be the first global peer-to-peer payments network. It claimed it would serve the 1.7 billion people without access to traditional banking.

March: The Russian Invasion and Cash in Ukraine

Demand for cash spiked during the Russian invasion of Ukraine. The National Bank of Ukraine (NBU) moved to secure the cash supply and encouraged civilians to make cashless payments.

On February 25, the NBU said that “banks to the extent possible replenish ATMs with cash. The NBU, in its turn, is supplying banks with cash and liquidity.” “Banks shall continue to operate […] ATMs shall be supplied with cash without any restrictions, [… and] the NBU shall provide unlimited cash support,” said the NBU in a martial law resolution.

April: Dutch Stakeholders Sign Covenant to Ensure Proper Functioning of Cash

Twenty-three Dutch organisations involved in the payments system signed a new Covenant to ensure that cash continues to function correctly as a payment instrument in the face of a steady increase in electronic payments.

The covenant sets out agreements among the parties to safeguard the permanent availability and accessibility of cash. They cover various topics such as the number of ATMs, fallback options for electronic payments, an inclusive payment system, and anti-money laundering measures. Banks have agreed to keep fees for cash services unchanged until mid-2023.

June: Spain Passes Law Requiring Retailers to Accept Cash

The Royal Decree 24/2021, or General Law for the Protection of Consumers and Users, making it mandatory for retailers to accept cash, entered into force on May 28. Refusing a payment in cash is considered a violation of the law.

The refusal of a payment in cash is considered a minor offence. Still, it can become severe under certain conditions, for instance, if a retailer takes advantage of the demand for specific products or services or repeatedly refuses cash payments, causing painful, unjust, and unforeseeable social disturbances.

July: A Global Update on Cash Demand in Turbulent Times

Following exceptional growth in 2020, cash demand returned to normal in 2021. It is remarkable that even after such a fantastic year, the median annual growth rate of the value of banknotes in circulation did not fall close to zero or even reach a negative figure but kept the level it had before the pandemic. Global data for 2022 is not available at the time of writing. Still, one can anticipate that the rapidly rising interest rates increase the opportunity cost of holding cash, while geopolitical tensions increase the precautionary motive to keep the money.

Seemingly independently from the growing precautionary demand for banknotes, the long-term trend of the share of cash in transactions is generally decreasing. This divergence in using cash for payments and saving purposes, respectively, might not be an issue if cash were still the dominant means of payment in a given country or region. However, when cash is on the way to becoming a marginal payment instrument, this raises the question of the maintenance of the cash infrastructure and the role of public money.

August: Cash and the Cost-of-Living Crisis in the U.K.

As the cost-of-living crisis deepens due to economic stagnation and rampant inflation, more people turn to cash to manage their budgets, driving up withdrawals and deposits. “People will be taking out cash and physically putting it into pots, saying, ‘This is what I have for bills, this is what I have for food, and this is what’s left,” said Natalie Ceeney, chair of the Cash Action Group. #CashStuffing has become a hot trend on TikTok and Instagram among Gen Z, with over 700 million views.

Paradoxically, the downsizing of the U.K. cash infrastructure has driven customers to turn to the Post Office to access cash. Many retailers who avoided cash during the pandemic have returned to accepting cash payments.

September: CashEssentials presents the first CashTech Innovation Awards

The CashTech Innovation Awards celebrate the tremendous advances in harnessing digital technology to ensure an accessible, reliable, and sustainable future for cash.

The winners were:

October: The Austrian Central Bank launches the Euro Cash 360° Platform to Promote Cash

The Central Bank launched the Euro Cash 360° Platform, along with the Austrian Mint, social partners, and other interest groups, to strengthen and safeguard the role of cash by facilitating open dialogue. The platform openly promotes cash in stark contrast to the traditional neutrality of most central banks.

In parallel, over half a million Austrians have signed a petition calling for a referendum on the constitutional enshrining of the right to unlimited cash payments. Petitions which receive over 100,000 signatures require a debate in Parliament.

November: The Irish Government Proposes to Protect Access to Cash

A Department of Finance report highlights the increasing pressure on the cash infrastructure due to the closing of bank branches and ATMs. It recommends a legislative framework to ensure reasonable access to cash. The initial objective will be to preserve access at December 2022 levels.

Ireland joins a growing group of countries that have issued guiding principles or regulations for access to cash, including the UK, Canada, the Netherlands, Lithuania, Sweden, and Finland.

December: The Social Role of Money in an Age of Digitalisation

The Axa Research Fund published an in-depth analysis of societal resilience. The publication highlights that three decades of economic growth and technological innovation have contributed to reducing extreme poverty and increasing literacy. This has, however, been achieved to the detriment of the environment and has come with growing social and economic inequality.

In particular, the digitalisation of money comes with a high social cost despite undeniable gains in convenience and efficiency. It negatively impacts social cohesion and financial inclusion. With digitalisation, the monetary system becomes more a private good than a public one – and one that risks leaving the most vulnerable behind.

This post is also available in: Spanish