Drumbeats for the cashless society

ancona

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Cashless does nothing but disenfranchise the poor and unbanked. It is Orwellian in the extreme and will never be fully acceptable.
 

pmbug

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Australia's Liberal Party government has announced that it will soon be illegal to purchase anything over $10,000 with cash. The government says it's "encouraging the transition to a digital society" and cracking down on tax evasion. But not everyone is happy with the move.
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The ban starts on 1 July 2019 and any payment over $10,000 will have to be made by check or credit/debit card. The government will enforce the measure by allocating roughly $300 million for what it calls the Black Economy Standing Taskforce. ...
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Australians have a strange relationship with cash - strange in the sense that they still use it. Roughly 37 per cent of all commercial transactions in Australia are made using cash. That number is just 32 per cent in the US and 15 per cent in Sweden. Many Swedes are angry about its slow move to a cashless society, arguing that going completely digital causes security concerns. And India began phasing out a whopping 86 per cent of its currency in November of 2016 by invalidating ₹500 and ₹1000 notes as legal tender.
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Today it's any sum over $10,000 in Australia, but anyone with their eyes open can see where this is going. ...
https://www.gizmodo.com.au/2018/05/...l-purchases-over-10000-starting-july-of-2019/
 

pmbug

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The IMF has noted that central bankers typically cut interest rates by 5% to 6% during recessions. However, with interest rates in many countries close to zero, this does not give them enough room to cut as it has been considered difficult to cut rates below zero because people could just withdraw physical cash from the bank to avoid having to pay to keep their money in digital form.

The IMF, maybe taking inspiration from its namesake the Impossible Mission Force (cue Tom Cruise), has recently provided a handy guide for its 189 member countries on how to enable deep negative rates (emphasis, deep), saying that zero need not be a bound(ry). What is noteworthy about the release of this document is that it indicates that in central bank circles, negative rates has moved from a “should we do it” discussion to “how do we do it”.

While the idea of paying to hold money, or even paying people to borrow money, may seem absurd, the IMF sees deep negative rates as “critical for central banks to maintain effectiveness of monetary policy in the future and will help mitigate the hardships associated with prolonged recessions”. At least they are explicit that lower interest rates “work” because they favour borrowers at the expense of lenders (i.e. savers) as borrowers are more likely to spend any reduction in their loan repayments. Seems like a one-sided hardship mitigation.

In additional to setting a lower exchange rate between paper and digital currency (e.g. when depositing $100 cash in a bank, you only get $98 credit to your account), which is the IMF’s preferred approach, they discuss other methods of enforcing negative interest rates including:
  • Cash withdrawal limits or limits on cash deposits
  • Purposely keeping low inventory of cash in bank branches
  • Banning storage of paper currency as a business
  • Putting restrictions on flows of paper currency in and out of the country
  • Retiring large denomination notes
  • Abolishing paper currency outright

If you think this all sounds unlikely, governments have shown a willingness to consider similar measures. The Federal Government is still pushing forward with its $10,000 cash payment limit to commence on 1 January 2020 (delayed from 1 July 2019). ...
More: https://www.abcbullion.com.au/investor-centre/pdf/china-buys-gold-as-trade-wars-escalate
 

pmbug

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In the 2018-19 Budget, the Government announced it would introduce an economy-wide cash payment limit of $10,000 for payments made or accepted by businesses for goods and services. Transactions equal to, or in excess of this amount would need to be made using the electronic payment system or by cheque. The Black Economy Taskforce recommended this action to tackle tax evasion and other criminal activities.

The Government has today released for public consultation exposure draft legislation and accompanying explanatory material to implement the economy-wide cash payment limit from 1 January 2020 and for certain AUSTRAC reporting entities from 1 January 2021.

Submissions to the consultation are open until Monday 12 August 2019.
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https://treasury.gov.au/consultation/c2019-t395788
 

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Watching through the video posted in the NIRP thread ( https://www.pmbug.com/forum/f13/negative-interest-rates-nirp-3188/index2.html#post34179 ), they referenced an empirical study of cash restrictions. I looked it up and found it:

... The conclusion of this paper is that cash has a minor influence on the shadow economy, crime and terrorism, but potentially a major influence on civil liberties. ...
https://www.econstor.eu/bitstream/10419/162914/1/Schneider.pdf

The author, Friedrich Schneider has participated in many studies and research papers published for the IMF and such. The St. Louis Fed has a convenient index to his work here:

https://ideas.repec.org/e/psc166.html
 

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The Wall Street Journal is now beating the drum:
The future of money might be a digital version of the cash that's already in people’s wallets -- potentially upending the currency system that the world has known for many decades.
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... central bankers and governments ... are increasingly warming to the idea of "digitizing" their own national currencies. That is, they would issue money that would exist only virtually, without a paper or coin equivalent, and be universally accepted as a form of payment. ...
h/t: http://gata.org/node/19472
 

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Most Europeans still cling to physical cash while nations in Asia have embraced cashless payments the most. This is the conclusion of the 2018 World Cash Report that lists different studies analyzing peoples’ habit to pay by cash or card (or even mobile).
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Japan is one of the exception to the rule of Asian countries loving cashless payments. The government has recently revealed its “Cashless Vision” which is looking to increase cashless payments to 40 percent by 2025. ...

https://www.statista.com/chart/19868/share-of-cash-payments-in-different-countries/
 

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Here's a twist on the cashless society issue... Cash is disappearing presumably because people value it too much.

Some Australians are burying it. The Swiss might be hiding it. The Germans are probably hoarding.

Banks are issuing more notes than ever and yet they seem to be disappearing off the face of the earth. Central banks don’t know where they have gone, or why, and are playing detective, trying to crack the same mystery.

The puzzle is especially perplexing since societies and companies are going cashless, given the boom in payments by cards and cellphone apps.
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The European Central Bank, and others, tried asking the public for help.

“Everyone says that they are not hoarding cash but the money is clearly somewhere,” said Henk Esselink, head of the issue and circulation section in the ECB’s currency management division.

Australia’s central bank says its best guess is that only around a quarter of the bank notes in circulation are used for everyday transactions. Up to 8% of cash is used in the shadow economy—tax avoidance or illegal payments—while as much as 10% could have been lost. That is $7.6 billion Australian dollars ($5.2 billion) missing at the beach or in couch cushions.

The biggest use of cash is as a store of wealth “in safes, under beds and at the back of cupboards, both here in Australia and elsewhere around the world,” Mr. Lowe, the RBA governor, said.

Officials at the Swiss National Bank ran with another theory: hoarded bank notes should wear out less because they aren’t being used for everyday transactions.

Demand for high-denomination bank notes tends to rise when interest rates are low, households feel distrustful of the banking system or people want to make transactions anonymously.
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Around a third of New Zealand’s new bank notes headed overseas in 2017, up from 6% four years earlier. That happened around the time that tourism overtook dairy as the country’s main export money-spinner, leading officials to speculate on the role played by currency exchanges, especially in Asia.

The trail mostly ran cold after that. The bank could only identify the whereabouts of around 25% of New Zealand’s cash.

“Our sense is that we’re in the same boat as a lot of other central banks out there,” said Christian Hawkesby, assistant governor at the RBNZ. “We can’t fully explain why holdings of cash are rising and where they are going.”
https://www.wsj.com/articles/the-wo...vSource=cx_picks&cx_tag=collabctx&cx_artPos=2
 

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The Federal Reserve is investigating the second significant disruption in 2019 of a payments service administered by the U.S. central bank.

Certain bank transactions were delayed after ACH -- which stands for the automated clearinghouse system -- experienced delays, but it is now up and running.

“The FedACH service, which processes transactions for commercial banks, is currently operating normally after experiencing delays in processing yesterday afternoon and early this morning,” Jean Tate, a spokeswoman at the Atlanta Fed, said in an e-mailed statement. “Some customers experienced delays in receiving confirmations of yesterday’s transactions. Federal Reserve technical staff continue to investigate the root cause of the issue.”
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https://www.bloomberg.com/news/arti...nt-system-operational-after-suffering-a-delay

Digital systems can fail.

h/t: https://www.zerohedge.com/markets/n...utage-hits-due-federal-reserve-network-issues
 

11C1P

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`

French central banker says digital currency cannot be private

https://www.oann.com/french-central-banker-says-digital-currency-cannot-be-private/

"PARIS (Reuters) – Digital currency could be useful as cash transactions dwindle in some countries but central banks should be in charge of issuing it, not private companies, Bank of France Governor Francois Villeroy de Galhau said on Saturday.

Spurred by the rise of cryptocurrencies and Facebook’s plans to launch its Libra currency, central banks worldwide are looking into the possibility of issuing digital money to prevent the loss of state control over money.

Villeroy said the proposals were not a reaction to Facebook’s plan, responding instead to fast-evolving technology and some banks’ need for digital currency. He added that private citizens could also start wanting an alternative to cash.

“In some northern European countries, notably Sweden and the Netherlands, the use of bank notes is falling extremely quickly and they are wondering whether we need to give citizens the right to digital money that is no longer a physical bank note but
..."

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The World Economic Forum (WEF) — together with some of the world's major central banks — has created a central bank digital currency (CBDC) policymaker toolkit.

According to an announcement on Jan. 22, the toolkit is the WEF's attempt to help policy-makers understand whether deploying a CBDC would be advantageous and guide them through its design.

The WEF collaborated with regulators, central bank researchers, international organizations and experts from over 40 institutions to develop the framework. ...

The WEF’s framework divides CBDCs into three categories: retail, wholesale and hybrid. The first category allows non-financial users to hold digital currency accounts, while the second is an electronic system granting access to the central bank reserve that could be used by commercial banks and other financial institutions for interbank and security transactions.

Hybrid CBDCs allow financial institutions that do not usually have access to a central bank deposit facility to hold reserves at it. This would enable stronger safeguards and monitoring of those organizations and improve interoperability between different payment systems, according to the WEF.

The paper explains that in the case of a DLT-based CBDC, the central bank would preserve full control over the issuance of the digital currency:

[The central bank] could delegate transaction approval to a more decentralized network, most likely consisting of regulated financial institutions. Transaction approval could follow a pre‐specified consensus process determined by the central bank, which could include privileges for the central bank such as transaction ‘veto’ powers or visibility. It is also possible to develop a DLT system in which the central bank remains the only validating node yet it benefits from other advantages related to DLT.
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https://cointelegraph.com/news/worl...s-framework-for-central-bank-digital-currency

This is the framework paper if anyone cares for the details: http://www3.weforum.org/docs/WEF_CBDC_Policymaker_Toolkit.pdf
 

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DAVOS, Switzerland — A growing number of voices are calling for the U.S. to issue a "digital dollar" as China continues to work on a digital version of its own currency.

Users of the U.S. dollar are "underserved by an analogue currency in a digital world," Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC), said during a side event at the World Economic Forum in Davos.
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More: https://www.msn.com/en-us/money/mar...ith-a-digital-yuan/ar-BBZgb6L?ocid=spartandhp
 

rblong2us

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'DAVOS, Switzerland — A growing number of voices are calling for the U.S. to issue a "digital dollar" '

would that be the local folk who live in Davos, the workforce who keep them comfortable, or those opinionated 'leaders' of the free world who occasionally visit ?
 

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The Federal Reserve is looking at a broad range of issues around digital payments and currencies, including policy, design and legal considerations around potentially issuing its own digital currency, Governor Lael Brainard said on Wednesday.

Brainard’s remarks suggest more openness to the possibility of a Fed-issued digital coin than in the past.

“By transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost,” Brainard said at a conference on payments at the Stanford Graduate School of Business. She did not touch on interest rates or the current economic outlook.

“But there are risks,” Brainard said, in a partial reprisal of her own and other global central bankers’ worries about the rise of private digital payment systems and currencies, including Facebook’s Libra digital currency project.

“Some of the new players are outside the financial system’s regulatory guardrails, and their new currencies could pose challenges in areas such as illicit finance, privacy, financial stability and monetary policy transmission,” she said.

Central banks globally are debating how to manage digital finance technology and the distributed ledger systems used by bitcoin, which promises near-instantaneous payment at potentially low cost.

The Fed is developing its own round-the-clock real-time payments and settlement service and is currently reviewing 200 comment letters submitted late last year about the proposed service’s design and scope, Brainard said.

But the Fed is also, she said, “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC (central bank digital currency).”

Dozens of central banks globally are also doing such work, a recent international study showed, with China moving ahead on plans to issue a digital coin.
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https://www.reuters.com/article/us-...ank-digital-coins-brainard-says-idUSKBN1ZZ2XF
 

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From a cup of coffee to a car ride, mobile devices or plastic cards are becoming the preferred, and sometimes exclusive, methods of payment in many parts of the world.

But being forced to pay that way, rather than having the option of using cash, may soon be illegal in New York City.

The City Council approved legislation on Thursday that prohibits stores, restaurants and other retail outlets from refusing to accept hard currency.

The measure puts New York at the forefront of a national movement to rein in so-called cashless businesses: New Jersey, Philadelphia and San Francisco all approved such bans last year, and several other cities are considering similar moves. Massachusetts has had a law requiring retailers to accept cash and credit since 1978.
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https://www.nytimes.com/2020/01/23/nyregion/nyc-cashless-ban.html
 

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Estimates vary but it’s widely predicted that Britain is well on the way to becoming a cashless society, and could reach that state within ten to 15 years.

Has the public been consulted? No. Is the Government showing signs of concern about the millions of people who would struggle to cope with a cashless society? Not that I’ve noticed.

Most of us will have experienced how increasingly difficult it is even to get access to one’s own money.
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More: https://www.dailymail.co.uk/debate/...LOVER-greedy-banks-allowed-make-cashless.html

... with the opening of the Tesco Express store on High Holborn in central London, it seems that another step has been taken on the journey towards a cashless society.

The store has fourteen till points but just two are staffed - to handle alcohol and tobacco sales - and it will only take payments from contactless cards, debit and credit cards, Apple Pay and Tesco Pay+.

Tesco claim that by going cashless, it will mean that customers will be able to complete their payment more rapidly, but at what cost? ...
https://www.forbes.com/sites/andrew...opening-of-first-cashless-store/#4e86ab4620c4
 
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