The “war on cash” refers to a laid of policies, inward the U.S. as well as around the world, deploying the powerfulness of authorities agencies to suppress the job of newspaper currency. The principal aim is to shift transactions to credit bill of fare as well as banking concern concern human relationship media that teach out an electronic information trail for police force enforcement as well as taxation authorities. Influenza A virus subtype H5N1 secondary aim is to heighten the toll of cash storage as well as so equally to allow the cardinal banking concern to force nominal involvement rates farther below zero.
The phrase “war on cash” is of class intended to last dramatic. Harvard economist Kenneth Rogoff (2017) has objected to it equally “a polemical exaggeration” inward his reply to a critical essay review (Hummel 2017) of his recent majority on the topic. What he considers an exaggeration is non the term “war,” hear you, but the unqualified term “cash,” given that he himself advocates exclusively “a state of war on large bills” as well as non a fully “cashless society.” Point granted. But this complaint virtually overly dramatic phrasing is a chip ironic coming from the author of a majority entitled The Curse of Cash, not The Disadvantages of High-Denomination Bills (Rogoff 2016a).
Some other writers as well as officials wage state of war non exclusively on large bills but also on all cash transactions as well as on other private payment methods similar bitcoin. They do seek a cashless society. They desire to drive all transactions into forms that teach out an audit trail for the police force enforcement as well as taxation authorities. In this honour the phrase “war on cash” is also narrow rather than also broad. It is really a “war on fiscal privacy.” They would welcome us to a fiscal panopticon.
The phrase “war on cash” suggests a parallel to the “war on drugs” as well as aptly so. In both wars, traditional civil liberties are shunted aside inward the criminalization, surveillance, as well as prosecution of victimless private activities.
The head indictments of large-denomination currency notes yesteryear anti-cash warriors are built on
guilt yesteryear association: criminals job large notes, as well as so anyone who uses them powerfulness last a criminal. It is of class truthful that the notes are used yesteryear taxation evaders, money launderers, terrorists, human traffickers, drug dealers, as well as whatever other horrible type of criminals you lot powerfulness similar to name.
But large notes are also used yesteryear noncriminals. While it is no dubiousness truthful that banning high-denomination notes would “make life harder” for criminal enterprises (Sands 2016), it would also, equally I have got previously written (White 2016), “make life harder for everyone else.” The balance of us also divulge high-denomination notes convenient right away as well as in ane trial again for completely legal as well as noncontroversial purposes, similar buying automobiles as well as carrying opor-garai cash compactly. Influenza A virus subtype H5N1 serious survey of eurozone currency job finds that “in Italy, Kingdom of Spain as well as Republic of Austria … almost one-third of the interviewees e'er or often job cash for purchases betwixt €200 as well as €1,000” (ECB 2011). Influenza A virus subtype H5N1 Deutsche Bundesbank webpage (2016) has noted that, inward the eurozone, “Cash inward circulation has to a greater extent than than quadrupled since euro currency was introduced; it right away stands at to a greater extent than than €1 trillion.” Is this because criminal offense has quadrupled? No. More likely, it is because cash is a convenient payment method, as well as cash has teach less costly to concord with the euro bringing lower inflation to the formerly high-inflation fellow member countries.
Coercive efforts to suppress cash deprive honest people of the powerfulness to job their preferred method of payment. The demonetization fiasco inward India, discussed below, is a dramatic instance of the resulting harms.

Current Tactics inward the War

The head policy tactics inward the state of war on cash are currently four:
1. Abolish high-denomination banknotes.
2. Place a maximum legal value on cash payments.
3. Require declarations from whatever political party carrying a cash amount higher upwardly a specified value across the national border.
4. Require banks to study to authorities whatever cash deposits or withdrawals inward amounts higher upwardly (or suspiciously near) a specified value.
I volition comment on the condition of each of the 4 inward turn, for the do goodness of the reader who is non aware how far the state of war on cash has already proceeded. I annotation hither without farther tidings that in that location is verbalize inward some developed countries of deploying additional weapons, including a taxation on cash withdrawals higher upwardly a threshold amount such equally already practiced inward Nigeria. I annotation also that since 2016 Hellenic Republic has required citizens to declare to the taxation authorities whatever personal cash holdings of €15,000 or more.

Abolish High-Denomination Banknotes

Central banks long agone (the 1930s inward the United States) monopolized the number of currency notes, banning private annotation number yesteryear commercial banks inward all but a few places (Scotland, Northern Ireland, Hong Kong). This may last regarded equally an early on authorities victory inward the state of war on cash.1 As a outcome governments tin right away restrain the sizes of currency notes inward circulation simply equally an administrative matter. Influenza A virus subtype H5N1 few cardinal banks inward recent years have got withdrawn their pop high-denomination banknotes. Most prominently the European Central Bank, citing concern virtually the criminal job of currency, late stopped producing its €500 notes as well as volition halt distributing them inward 2018. The largest U.S. dollar currency annotation has remained the $100 mouth since the $500 mouth was eliminated inward 1969, but the $100 mouth today buys less than the $20 mouth did inward 1969. It is because of the state of war on cash that the U.S. has non reintroduced a $500 mouth to maintain upwardly with inflation. Rogoff (2016a), Summers (2016), as well as Sands (2016) advocate removing the $100 mouth equally presently equally possible. Rogoff would also take away the $50 as well as $20 bills inward due time.
As farther discussed below, inward Nov 2016 the Indian authorities all of a abrupt withdrew its 2 largest as well as most pop currency notes, the Rs. 500 as well as Rs. 1,000, together constituting 86 pct of the currency stock. But the “demonetization” was temporary: the authorities presently began replacing the old notes with a redesigned Rs. 500 annotation as well as a novel Rs. 2,000 note. By mid-October 2017 the stock of currency inward circulation had returned to xc pct of its grade earlier the annotation ban (Livemint 2017), as well as it remains on an upward trend. Contrary to the hopes of some that the daze policy would jump-start the replacement of cash yesteryear electronic payments, no sizable number is evident.
The Swiss National Bank is the most of import cardinal banking concern soundless bucking the trend. It has said that it has no plans to withdraw its 1,000 Swiss Franc annotation (Guardian 2016b), worth US$1,010 at the telephone substitution charge per unit of measurement of Oct 25, 2017.

Place a Legal Ceiling on Cash Payments

Ceilings on the allowed size of cash payments to businesses are mutual inward Europe. Influenza A virus subtype H5N1 Deutsche Bundesbank (2016) webpage reports, “Restrictions on cash payments are currently inward identify inward 12 of the 28 European Union fellow member states.” In Italy the maximum allowable consumer-to-business or business-to-business cash payment yesteryear residents is currently €2,999.99; inward French Republic as well as Kingdom of Spain the bound is €1,000; inward Hellenic Republic it is a mere €500. The German linguistic communication finance ministry building inward early on 2016 proposed a national bound of €5,000 but met with rigid political resistance from defenders of fiscal privacy (Guardian 2016a). Person-to-person cash payments appear non to last capped, which indicates that the target of the restrictions is taxation evasion rather than terrorism or crime.
While such a cash payment ceiling has non yet been introduced inward the United States, whatever concern that receives $10,000 inward cash from a unmarried client must study it to the taxation authorities inside xv days on IRS/FinCEN Form 8300. The Internal Revenue Service (IRS) shares the information with the Treasury’s Financial Crimes Enforcement Network (IRS 2017). Businesses that must often file Form 8300 include sellers of big-ticket items similar automobiles, boats, aircraft, jewelry, as well as furniture, as well as providers of big-ticket services similar police force firms, existent estate brokers, insurance agencies, as well as go agencies.

Require Individuals to Declare Cash higher upwardly a Legal Minimum Upon Entering the United States

Under the Currency as well as Foreign Transaction Reporting Act (CFTRA), the United States’ authorities requires whatever political party (individual or grouping traveling together) bringing $10,000 or to a greater extent than of cash (or travelers’ checks or other negotiable instruments) into the the world to declare the amount at the border. Failure to declare makes the currency contraband land of study to seizure. For entrants to the eurozone the threshold is €10,000. The European Commission has proposed expanding the ambit of requirement to include golden as well as other precious commodities. For mainland China, the threshold is US$5,000. Switzerland as well as Hong Kong, yesteryear contrast, have got no cash proclamation requirements.

Require New Reports on Cross-Border Currency Transactions for Financial Institutions

Under the same CFTRA, also known equally the “Bank Secrecy Act,” a U.S. fiscal establishment must file a “Currency Transaction Report” (CTR) with FinCEN for whatever deposit, withdrawal, currency swap, or transfer involving $10,000 or to a greater extent than inward currency, whether or non the establishment employees handling it consider the transaction suspicious. They are required to file a “Suspicious Activity Report” for whatever activity they do consider suspicious if it involves $3,000 or to a greater extent than inward cash.
Subdividing deposits or withdrawals inward monastic enjoin to avoid triggering a CTR is itself a crime, called “structuring.” Innocent identify unit of measurement businesses have got been charged with structuring, as well as had tens of thousands of dollars seized yesteryear the federal government, simply for making repeated deposits or withdrawals below the $10,000 threshold. In the notorious instance of dairy farmers Randy as well as Karen Sowers, who ofttimes deposited cash income from sales at farmers’ markets, Treasury officials seized $29,500 inward Feb 2012, charging the pair with structuring, without suspecting them of whatever other crime. After an Institute of Justice petition as well as congressional hearings into the case, the federal authorities finally returned the seized money inward June 2016.
Under public pressure, the IRS as well as Justice Department amended their policies inward 2014 to forgo seizures for structuring where no other criminal offense (such equally taxation evasion or money laundering) is suspected. During the catamenia earlier that change, however, the Institute for Justice has estimated that the IRS took $43 1000000 from 618 people inward cases similar to the Sowers’ where mere structuring was the exclusively accuse (Rawlinson 2016).

Collateral Damage

The state of war on cash powerfulness last to a greater extent than accurately labelled the “war on people who job cash.” What are suppressed yesteryear the above-listed tactics are non inanimate objects but people. Cash itself experiences no harms. People do. Coercive anti-cash policies abridge the liberty as well as trim back the welfare of peaceful individuals who prefer to job cash.
More specifically, policies that bound cash job or otherwise compel people instead to pay through banks or credit bill of fare companies have got the next effects:
• They compromise fiscal privacy as well as enable the prosecution of victimless crimes wherever banks are required to “know their customers” as well as to render transaction records to authorities officials.
• They impose an unlegislated taxation on money-holders, as well as teach out them no agency of escape into untaxed media of exchange, whenever the cardinal banking concern decides to pursue a negative involvement charge per unit of measurement policy.
• They harm the livelihood of pocket-size businesspeople who rely on cash sales, specially those serving the unbanked or operating inward outdoor markets, as well as trim back the welfare of their (mostly poor) customers yesteryear raising transaction costs.2
The abrupt anti-cash offensive of the Indian authorities at the terminate of 2016 dramatically illustrates the tertiary laid of harms. To summarize the story,3 on Nov 8 Prime Minister Narendra Modi all of a abrupt announced that the 2 highest denomination rupee notes (the Rs. 500 as well as Rs. 1,000, worth virtually US$7.50 as well as $15) would teach invalid at midnight. Indian citizens had 50 days to deposit the invalidated notes into banks for deposit credit, or swap them for novel valid notes of Rs. 500 as well as Rs. 2,000. But initially the swaps could last made exclusively inward pocket-size amounts (Rs. 2,000, or virtually $30, per someone per day) because also few novel notes had been printed, forcing hundreds of millions to waste product literally billions of hours standing inward queues. The 2 invalidated notes together made upwardly 86 pct of the currency circulation yesteryear value, as well as currency made upwardly 62 pct of the money stock (currency plus checking deposits). More than one-half of the nation’s money stock (86 pct of 62 percent) was thence temporarily immobilized. In the critical words of Norbert Häring (2017), “Narendra Modi performed the non bad as well as fell experiment of starving the whole of Republic of Republic of India of cash for months.”
The currency shortage caused enormous hardship for the cash-dependent unbanked one-half of the Indian populace. For desire of a circulating medium, wage laborers usually paid inward cash went unpaid, as well as farmers were unable to sell their produce. By some counts in that location were to a greater extent than than ane hundred deaths of people waiting inward telephone substitution queues, or unable to teach medical handling or medicine because of lost cash income. Influenza A virus subtype H5N1 policy ostensibly intended to inflict losses on taxation evaders as well as criminals imposed severe collateral harm on honest users of currency.
The daze motility was intended to impose a one-time wealth loss on taxation evaders, bribe-takers, as well as other imagined holders of large “black money” currency hoards. Such people were expected to eat losses rather than gamble the official scrutiny that would accompany an endeavor to deposit or convert their hoards of old notes. As it turned out (Kaul 2017), 99 pct of the invalidated notes were returned. People with dark wealth were either non holding much inward the shape of currency or successfully hired surrogates to swap or deposit their currency.
Commenting on the Indian experiment inward its midst (November 2016), Rogoff (2016b) wrote: “Is Republic of Republic of India next the playbook in The Curse of Cash? On motivation, yes, absolutely… . On implementation, however, India’s approach is radically different.” Unlike Modi’s program, Rogoff’s programme calls for a gradual phase-out of large bills, has no reintroduction of them, as well as “is non aimed at developing countries, where the part of people without effective access to banking is exactly also large.” It is truthful that a preannounced phase-out of large-denomination currency notes require non create a temporary currency shortage. But fifty-fifty inward rich countries it volition heighten the toll of transacting for law-abiding people who job large notes, as well as thence trim back their existent income, exactly equally inward Republic of Republic of India if non as well as so dramatically.
Large-note abolitionist Peter Sands (2016) supposes that “lower denomination notes offering an exclusively slightly to a greater extent than inconvenient solution for ordinary people, given the sums involved,” piece “only the real wealthy would last genuinely inconvenienced.” This sort of casual assessment does non demonstrate that the benefits laissez passer on the costs of inconvenience for withdrawing the US $100 bill, much less for also withdrawing the $50 as well as $20 bills. Note that the $100 mouth is pop around the globe equally a savings as well as transaction vehicle, such that its withdrawal would inconvenience a non bad many who are non real wealthy. And, when the governments of low-income countries impose coercive policies to shove ordinary people out of cash as well as into other payment methods, it is the misfortunate who are harmed.
Am I attacking a straw human being here? Who really advocates a state of war on cash inward low-income countries? The of import Better Than Cash Alliance (BTCA) does.4 Operating nether the aegis of the United Nations, the BTCA advances the implausible thought that removing cash from the payment options of the world’s misfortunate volition do goodness the misfortunate equally business office of a programme of promoting “financial inclusion.” Some of the funding partners of the BTCA, nonprofit organizations similar the Bill as well as Melinda Gates Foundation as well as Omidyar Network, may sincerely have got the interests of the misfortunate at heart.5 Other funding partners may have got other agendas, namely the giant payment processors Visa, MasterCard, as well as Citi, which tin await to gain transaction fees. Members of the BTCA include international agencies as well as governments that tin await to gain taxation revenue yesteryear driving transactions out of cash.
The BTCA says that its destination is to promote “the transition from cash to digital payments in a way that improves lives.” But touchstone economical reasoning tells us that improving lives agency adding attractive options, non removing what people currently consider their most advantageous options. Taking away people’s best options (including payment options) is seldom a way to brand them wealthier or improve off equally they encounter it. The BTCA studiously overlooks this obvious consideration. Its literature treats transition to digital payments equally welfare-improving no affair the costs or compulsion involved. Influenza A virus subtype H5N1 BTCA study on “Accelerators to an Inclusive Digital Payments Ecosystem” (BTCA 2016) recommends “measures to encourage or require government entities, private businesses, as well as individualsto shift away from cash, sometimes inward the shape of policies that disincentivize cash usage” (emphasis added). It endorses Nigerian authorities policy measures that include a taxation on cash withdrawals higher upwardly a daily limit, a ban on unlicensed cash courier services, as well as a prohibition against banks cashing large third-party checks. Although they wing the banner of fiscal inclusion, equally Häring (2017) observes, yesteryear advocating coercive policies, the BTCA as well as like-minded agencies really “support fiscal exclusion of misfortunate people yesteryear preventing them from using their preferred as well as often exclusively agency of payment.”
Is in that location a collective-action rationale (perhaps a network-externality problem) for compelling or subsidizing people to surrender cash? Not that I have got seen anyone spell out. There is no such job evident inward the procedure of attracting payers to job the banking scheme rather than cash. In every the world where banks offering checking accounts, noncash payments have got already established a foothold, as well as the infrastructure already exists for clearing as well as settling deposit transfers. At the margin of transactions betwixt unbanked as well as banked individuals, people tin last persuaded to motility their payments from cash to digital transfer. They volition last persuaded in ane trial digital payments teach to a greater extent than beneficial or less costly to them than at present. Using compulsion is an admission that the benefits to the payers don’t yet laissez passer on the costs.
Attracting cash users to digital payments, inward a way that improves their lives from their ain perspective, is thence an entrepreneurial challenge, non a collective activeness problem. The BTCA’s instance for forcing people to halt using cash in their ain interest is an empty box. To genuinely promote the well-being of the misfortunate as well as everyone else, the BTCA should explicitly decline policies that restrain the choices of cash users.

Conclusion

Well-meaning supporters of the “war on cash” should inquire themselves whether the state of war is really inward the public’s involvement rather exclusively inward than the private involvement of taxation authorities as well as incumbent payment service providers. They should consider how it looks from the dot of stance of skeptics similar Don Quijones (2016):
The state of war on cash is existence waged for the exclusive do goodness of those who already wield an inordinate amount of powerfulness as well as command over the economic scheme as well as the people that are struggling inward it. And they desire more. By slowly, quietly killing cash, they seek to seize the in conclusion remaining thing that offers people a pocket-size semblance of privacy, anonymity, as well as personal liberty inward their increasingly controlled as well as surveyed lives. And the way things are going, they’ll teach it.
The concerns of the opponent of dominion yesteryear experts cannot last readily dismissed equally unwarranted as well as so long equally the tactics used inward the state of war really do threaten autonomy as well as fiscal privacy. “First, do no harm” should last the watchword for the doctors of political economy.

References

BTCA (Better Than Cash Alliance) (2016) “Accelerators to an Inclusive Digital Payments Ecosystem.” Available at www.betterthancash.org/tools-research/reports/accelerators-to-an-inclusive-digital-payments-ecosystem.
Desjardins, J. (2017) “The Global War on Cash.” The Money Project, Infographic (January 18). Available at money.visualcapitalist.com.
Deutsche Bundesbank (2016) “Cash Discussed at Symposium” (June 15). Available at www.bundesbank.de/Redaktion/EN/Topics/2016/2016_06_15_bargeldsymposium.html.
ECB (European Central Bank) (2011) “The Use of Euro Banknotes: Results of Two Surveys alongside Households as well as Firms.” Available at www.ecb.europa.eu/pub/pdf/other/art2_mb201104en_pp79-90en.pdf.
Guardian (2016a) “German Plan to Impose Limit on Cash Transactions Met with Fierce Resistance.” (February 8).
__________ (2016b) “Swiss 1,000-franc Note Here to Stay, Says National Bank (February 16).
Häring, N. (2017) “Modi, Yunus, as well as the Financial Inclusion Mafia” (March 26). Available at http://norberthaering.de/en/home/31-english/802-modi-yunus.
Hummel, J. (2017) “The War on Cash: Influenza A virus subtype H5N1 Review of Kenneth Rogoff’s The Curse of Cash.” Econ Journal Watch 14 (May): 138-63.
IRS (Internal Revenue Service) (2017) IRS Form 8300 Reference Guide.
Kaul, V. (2017) “The Final Nail inward the Demonetisation Coffin.” Vivek Kaul’s Diary blog (September 4).
Livemint (2017) “Currency inward Circulation at 90% of Level earlier Note Ban” (October 20).
Quijones, D. (2016) “Who’s Powering the War on Cash?” (October 19). Available at https://wolfstreet.com/2016/10/19/powers-on-forefront-of-war-on-cash.
Rawlinson, S. (2016) “Victory for Maryland Dairy Farmer.” Institute for Justice Press Release (June 29).
Rogoff, K. S. (2016a) The Curse of Cash. Princeton, N.J.: Princeton University Press.
__________ (2016b) “India’s Currency Exchange and The Curse of Cash” (November 17). Available at http://blog.press.princeton.edu/2016/11/17/kenneth-rogoff-indias-currency-exchange-and-the-curse-of-cash.
__________ (2017) “Response to Jeffrey Rogers Hummel’s Review of The Curse of Cash.” Econ Journal Watch 14 (May): 164-73.
Sands, P. (2016) “Making It Harder for the Bad Guys: The Case for Eliminating High Denomination Notes.” M-RCBG Associate Working Paper No. 52, Mossavar Rahmani Center, Harvard Kennedy School of Government.
Summers, L. H. (2016) “It’s Time to Kill the $100 Bill.” Washington Post (February 16).
White, L. H. (2016) “Against Currency Prohibitionism.” Alt-M blog (April 1).
__________ (2017a) “Baptists as well as Bootleggers inward the Organized Effort to Restrict the Use of Cash.” Alt-M blog (January 31).
__________ (2017b) “India’s Failed Demonetization Program as well as Its Retreating Economic Defenders.” Alt-M blog (September 28).
White, L. H., as well as Rajagopalan, S. (2016) “India’s Currency Cancellation: Seigniorage as well as Cantillon Effects.” Alt-M blog (November 28).
1The earliest laws on banknotes inward the Great Britain as well as the U.S. were really bans on small notes, placing lower limits on the denominations that banks were allowed to issue.
2See Desjardins (2017) for an infographic presentation of these as well as other points.
3Here I describe on White as well as Rajagopalan (2016) as well as White (2017b).
4For to a greater extent than on the BTCA, encounter White (2017a).
5Note, however, that Pierre Omidiyar’s fortune came from cofounding the payment processor PayPal. For a skeptical stance of Bill Gates’ interests, encounter Häring (2017).
Lawrence H. White is Professor of Economics at George Mason University as well as a Distinguished Senior Fellow with the F. A. Hayek Program for Advanced Study inward Philosophy, Politics, as well as Economics at the Mercatus Center at George Mason University.
The higher upwardly originally appeared inward the Cato Journal: Spring-Summer 2018