Cash is also a store of value

After exceptional growth in banknote demand during the pandemic years, high inflation and growing interest rates have led to slower growth in 2022. But uncertainties continue to fuel precautionary demand for cash. Over 75% of currencies experienced positive growth of the value of cash in circulation.

A petition calls for banks to be required to ensure every community has access to cash and banking services and for physical retailers selling food and essential groceries to be required to accept cash.

The share of payments in cash declined slightly in 2022 to 18% of all payments. Store-of-value holdings of cash increased to $418 per person and remain far higher than pre-pandemic levels. 93% of consumers have no plan to stop using cash.

A recent IMF paper suggests that ATM cash withdrawals are better indicators of the use of cash for payments than the traditional metric of currency in circulation. However, the reasoning is somewhat biased and includes unconvincing arguments.

The downward trend in cash use has stopped in Switzerland. Around every third payment is made in cash. However, more money is spent on credit cards.

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.

Economists debate the merits of distributing cash rather than gifts for Christmas.

The European Council proposed to impose a limit of €10,000 on cash payments throughout the bloc, but the measure has yet to be accepted.

In 2019, only around 15% of the value of cash in circulation was used for domestic transactions in France, while 25% was held for precautionary motives. Over half was held outside France, primarily outside of the euro area.

In 2021, global cash demand returned to a normal pre-covid distribution, which is quite remarkable after the exceptional growth in 2020. Looking forward, demand will be influenced negatively by rising interest rates and positively by geopolitical tensions. More than ever, a well-functioning cash infrastructure is essential to meet volatile demand.

A new paper by the Central Bank of Turkey found that financial literacy reduces cash's transactional demand but increases its precautionary demand as a store of value, leading to an expansion of cash in circulation.

Currency News spoke to CashEssentials' founder and chair, Guillaume Lepecq, to find out more about how CashEssentials seeks to add value and influence public opinion on the social necessity of cash.