In recent years, many governments have been actively promoting the use of digital payments and encouraging the demise of cashMoney in physical form such as banknotes and coins.
. To motivate the shift to cashless, the critics of paperSee Banknote paper. 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...
usually assert that the removal of banknotes will help reduce tax evasion and criminal activities and boost the economy by speeding up the transaction flow.
Nevertheless, several factors often go unmentioned. First, abolishing cash will create discrimination. Low-income workers paid in cash will be clearly disadvantaged compared to the rest of the population and will have to adapt to a new system. This also applies to the younger generation that is unbanked and to the elderly, often not familiar with digital technologies. The demonetisationSee Demonetised banknote.
carried out in India last year clearly demonstrated that the removal of cash has a negative impact on social and financial inclusionA process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. While it is recognised that not all individuals need or want financial services, the goal of financial inclusion is to remove all barriers, both supply side and demand side. Supply side barriers stem from financial institutions themselves. They often indicate poor financial infrastructure, and include lack of ne...
Moreover, banning cash would certainly not help fight against criminals as they will just find another way to conduct illegal transactions. 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...
– the digital 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.
that enables anonymous operations – could represent an effective alternative for them. In addition, tax evaders might convert their cash funds into gold or other precious metals, which would thus only displace the problem.
Furthermore, fin-tech companies are striving to demonstrate the efficiency of their technology but there is still no evidence that electronic transactions are actually more efficient and cost-effective than cash. Indeed, studies led in Europe demonstrated that cash generates the lowest cost per transaction in various countries. Besides, a fully digitalised system would be extremely vulnerable to hackers and system failures.
Finally, the removal of tangible money would enable central banks to exercise a full control over interest rates, something that cannot be done today. At present, citizens still have the possibility to withdraw cash to circumvent negative rates and avoid having their savings charged with fees. In any case, governments should always leave consumers free to choose between various paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee.
means, regardless if the payment is virtual or tangible.