As part of a trend in restrictions on cashMoney in physical form such as banknotes and coins. More payments, the European Commission released its Inception Impact Assessment in preparation for a possible Proposal for an EU initiative on restrictions on payments in cash on January 23, 2017. The Commission has launched an online public consultation process. Examining the potential effects and legal issues associated with a European system of cash paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More restrictions, the document signals the Commission’s willingness to burden the ability of law-abiding citizens to spend their own moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More and contribute to their recovering economy.
ATMIA believes such limitations are against the public Interest; the interests of Europe economically; and the interests of the ATM industry. The ATMIA position paperSee Banknote paper. More is accessible here.
Eliminating cash would only shrink the shadow economy by 2-3%
In calling for limits on cash, the European Union presumably aims to reduce organized crime, tax evasion and terrorism and to bring businesses out of the shadow economy. However, there remains very little evidence of a correlation between cash and these systemic problems. According to research by F. Schneider, eliminating cash would only shrink the shadow economy by 2-3%. Meanwhile, a lack of supervision of the profits of multinational corporations deprives states of billions of euros in tax revenue.
The initiative also rests on the farfetched assumption that those involved in terrorism or organized crime would even submit to restrictions on cash payments. If it were the case, the effect on terrorism would be minimal. Expenses of terrorists tend to be low, while much of their finances originate from their conquered territories in the Middle East or from perpetrators’ personal accounts.
The anonymity afforded to criminals and terrorists by cash is being surpassed by pre-paid cards, bitcoinBitcoin is commonly said to be a cryptocurrency, a digital means of exchange developed by a set of anonymous authors under the pseudonym of Satoshi Nakamoto, which began operating in 2009 as a community project (Wikipedia type), without the relationship or dependency of any government, state, company or body, and whose value (formed by a complicated system of mathematical algorithms and cryptography) is not supported by any central bank or authority. Bitcoins are essentially accounting entries i... More and money transfer systems that are easy to manipulate
The anonymity afforded to criminals and terrorists by cash is being surpassed by pre-paid cards, bitcoin and money transfer systems that are easy to manipulate. As for the role of cash in money launderingThe operation of attempting to disguise a set of fraudulently or criminally obtained funds as legal, in operations undeclared to tax authorities, and therefore not subjected to taxation. Money laundering activities are strongly pursued by authorities and in most countries, there are strict rules for credit institutions to cooperate in the fight against money laundering operations, to declare and report any transactions that could be considered suspicious. More, the world’s foremost authority on the matter, the Financial Action Task Force, asserts that the most popular method of money laundering is the physical transportation of cash. Nowhere in its major reports does it mention cash payments in otherwise legal industries as a contributing factor.
Europeans have little to gain from cash restrictions, and the potential downsides are staggering. Cash is the preferred payment instrumentDevice, tool, procedure or system used to make a transaction or settle a debt. More of Europeans. 139 million Europeans without bank accounts depend on it. Limiting cash usage would further marginalize those who, for various reasons, have been shut out of traditional financial institutions. Proponents of cash’s supposed replacements—digital payment systems— decry the anonymity cash provides to its users. Yet, the intrusiveness and vulnerability that accompany electronic payments and credit card networks represent a threat to EU citizens’ rights to privacy and to protection of personal data, which are enshrined in the EU’s Charter of Fundamental Rights. Security breaches remain frequent, and the extension of third-party access to users’ payment and financial data constitutes a burgeoning industry in and of itself. Polls show that most Europeans are worried about how their personal data is used.
The proposed restrictions also undermine the guaranteed status of cash as legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More. The euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More banknote’s designation as legal tender, according to Article 128 of the Treaty of the Functioning of the European Union, means that limitations of its use may only be imposed when “other lawful means for the settlementThe discharge of an obligation in accordance with the terms of the underlying contract. In e-transfers the settlement may take days, whereas cash settlements are instantaneous and irreversible. More of monetary debts are available.” Yet, there are 139 million financially excluded Europeans unable to use the checks or credit cards that come with bank accounts, while those who do have bank accounts are often subjected to spending limits from their own banks.
The ubiquity of electronic payment instruments, though convenient, masks a network of costs that are shouldered by the customer. With increases in payment card fraud, the largest 10% of merchants pay $500,000 annually or more to protect consumers. For example, anti-money laundering measures in the United States have resulted in costs of up to $7 billion to the American payments industry. The fact that payment fraud data is not available at European levels reflects a total lack of transparency.
Euro banknotes reinforce feelings of a shared European identity. Support for the single currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More now stands at 70%, its highest ever
European policymakers dedicated to the project of the Union should also proceed with caution. Euro banknotes reinforce feelings of a shared European identity. Support for the single currency now stands at 70%, its highest ever. The less Europeans encounter physical euro banknotes, the less they will feel attached to the European Union itself, which is under attack from populist parties on the rise. “Holding a euro banknoteA banknote (or ‘bill’ as it is often referred to in the US) is a type of negotiable promissory note, issued by a bank or other licensed authority, payable to the bearer on demand. More and knowing that it can be used in 19 countries is a reminder of the deep integration Europe has attained,” said Mario Draghi on April 4, 2017.
Furthermore, exceptions for foreign nonresidents to existing cash restrictions in certain member states are unfair to law-abiding European citizens and can likely be exploited by foreign residents. As pieces of identity proving residency tend to remain separate from those that prove foreign citizenship, a merchant has no practical option for determining whether a customer does indeed lack residency.
At a moment when economic recovery finally seems within reach, the European Union should prioritize measures that encourage growth. Placing restrictions on how citizens spend their money would serve only to hamper spending, while failing to bring about the reductions in tax evasion, crime and terrorism that policymakers hope for.