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Dutch government to limit cash payments

Categories : Cash has legal tender status, Uncategorized
July 2, 2019
Tags : Legal tender, Netherlands, Regulation, Store of value
The Dutch government is putting forward a package of measures to Parliament, aimed at fighting against money laundering. Two of these measures specifically target cash: banning cash payments above and scrapping the €500 note.
Guillaume Lepecq

According to the Dutch press, the Dutch Finance Minister and Justice and Security Minister are putting forward a package of measures to Parliament, aimed at fighting against money laundering. Two of their measures specifically target cash.

The first measure would impose a €3,000 limit on cash payments.

Currently, 16 EU members states have imposed cash payment limitations, which range from €500 in Greece to approximately €14,000 in Poland.  The Netherlands have a declaration obligation which varies according to the type of retailer: e.g. €2,00 for money transfers of €25,000 for car dealers.

In June 2018, the European Commission published a report on the impacts of restrictions on payments in cash. This report is the result of a 2-year consultation on the issue, which included a public consultation as well as the commissioning of an impact study to an external contractor. The report concludes that:

The second measure calls for the €500 to be withdrawn from circulation.

This may prove more challenging to implement.

In May 2016, the ECB announced it would cease production and issuance of the banknote. The issuing continued until 27 January 2019 for 17 central banks of the euro area and 26 April 2019 for the Deutsche Bundesbank and the Oesterreichische Nationalbank. However , as stated on the ECB’s website “Existing €500 banknotes will continue to be legal tender, so you can still use them as a means of payment and store of value (i.e. spend and save them). Similarly, banks, bureaux de change and other commercial parties can keep recirculating the existing €500 notes. Like all denominations of euro banknotes, the €500 note will always retain its value and can be exchanged at a national central bank of the euro area at any time.»

According to the Treaty on the Functioning of the European Union – the Maastricht Treaty – only the euro has the status of legal tender within the euro area. Article 128 of the Treaty reads

“The European Central Bank shall have the exclusive right to authorise the issue of euro banknotes within the Union. The European Central Bank and the national central banks may issue such notes. The banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status  on the scope and effectsof legal tender within the Union.”

In May 2019, there were just under 500 million €500 notes in circulation representing a total value of €248 billion.

While legal tender does not automatically mean that the note should be accepted in all circumstances, and the interpretation of legal tender differs across countries, the European Commission has issued a recommendation on the scope of effects of legal tender of euro cash. The third guideline of the recommendations states that it should be the rule to accept high denomination notes.

Other measures included in the package consist in increasing the capacity of the Dutch money laundering authority and encouraging banks to share information on suspicious clients.