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Why choose to lose with more restrictions?

Categories : Cash is efficient
September 7, 2016
Tags : Banknote/Note, Cash circulation policies, Regulation
The negative consequences of cash restrictions greatly outweigh the benefits.
Communication Team / Equipo de Comunicación

With growing restrictions on cash payments and withdrawals across the globe, the ATM Industry Association (ATMIA) has decided to react. On September 6, 2016, they released a position paper to express their disaccord with this growing trend, arguing that restricting cash usage will not result in an automatic drop in fraud, criminal activities or financing of terrorism. Furthermore, the full abolishment of cash will trigger the financial exclusion of more fragile segments of society. 

Cash going strong

These restrictions come at a time when cash is going strong. Supporting this argument are numbers: about 80% of transactions worldwide are still carried out in cash. If we consider that the majority of people that use cash are law-abiding citizens, it means that these restrictions are only going against the will and daily habits of honest consumers.

Restrictions drive into the shadows

As seen in a recent crackdown in Greece (see “Greek businesses evade tax via POS machines”), at least 1,000 Greek businesses, mostly active in the tourism industry, have demonstrated that there are other ways to avoid taxes – in this case, payments were automatically sent to Bulgarian bank accounts, skilfully avoiding fiscal scrutiny. Similarly, criminal or terrorist organisations will not be discouraged by restrictions on cash usage nor by the abolishment of higher-denominations (as in the case of the € 500, which will no longer be issued after 2018) – their methods will only become more sophisticated.

The charts show that it’s not necessarily the implementation of restrictions that shrink the shadow economy. For example, Austria has no restrictions, contrary to Bulgaria, who limits cash payments to 5,000€. Yet, Austria’s shadow economy is very limited (8%) as opposed to Bulgaria’s (almost 31%). 

Why lose when there’s room to gain?

What is most alarming is that these regulations have been adopted by a growing number of governments without any empirical data or studies to support them. “It seems to be absurd to discriminate against cash in this manner when over 80% of global retail payments
today are still made using cash,” commented Mike Lee, CEO of ATMIA. “Why
cap cash payments when there is so much more to lose than to gain?”


To read ATMIA’s position paper, click here