Could a move to limit cash purchases in Australia give cryptocurrency and blockchain a boost?
The Australian government has banned cash for all purchases over $10,000 (€4,728) in a bid to curb tax evasion and money-laundering.
The hard limit comes into force on 1 July 2019. It was announced by the country’s Liberal Party Treasury spokesman Scott Morrison on 8 May. It means that any payment totalling over $10,000 Australian dollars will have to be made by credit card, debit card or cheque. But opinion is split as to whether this represents a real trend of a move to a cashless society.
Australians are still fond of cash – it makes up 37% of all transactions in the country – and this is perhaps why person-to-person and person-to-bank transactions are excluded from the legislation.
“It is very unlikely that cash will become obsolete,” says Sasha Ivanov, CEO of Waves, a blockchain platform that features a multiple-currency wallet and decentralised exchange.
“It will stay, but you won’t be able to use it as freely as you can now.”
Bitcoin and other crypto tokens were supposed to represent a democratisation of money – levelling the playing field for users with the lowest financial capital. It hasn’t quite worked out like this, but “current fintech is unable to provide ease of use, transparency and security for users and governments,” says Ivanov.
Are we moving towards a cashless society? Blockchain enthusiasts seem to think so, but opinion is split on how long it will take, and what the benefits to society at large will be.
Where cash goes we follow
Australia is certainly not the first country to limit large purchases using cash. Most governments recognise that large cash purchases – for deposits on houses or buying cars – are an easy way to wash dirty money.
In 2012’s Monti reforms, lawmakers in Italy forced through a cap on cash payments over €1,000, ostensibly to make it easier for authorities to track payments made to retailers. Italy also has very high levels of tax evasion. The cap didn’t last. In an attempt to boost consumer spending in 2016, former prime minister Matteo Renzi relaxed this hard limit to €3,000.
Elsewhere in Europe the picture is similarly mixed.
Romania limited cash payments to €1000 a day in 2015, but the law only specifies payments between a person and a company. Spain’s limit is €2,500. In Denmark, the limit on cash transactions is 50,000 krone (€6,700) and again was introduced ostensibly to curb money-laundering.
Germany is a relative outlier. It has the highest GDP in Europe at 4.2 trillion US dollars but unlike other high-performing states, its citizens still keep large amounts of cash on them.
German plans to introduce a €5,000 cap on cash transactions in 2016 sparked furious protests. 80% of transactions in the country are still made with physical notes rather than using NFC ‘tapping’ with debit cards, or mobile apps like Apple Pay and Samsung Pay.
As economist Max Otte told Bloomberg, asking ‘Why do Germans like cash?’ is “the wrong question,” he says. Instead we should be asking: “Why have others shifted to a cashless society so quickly?”
In second place in terms of GDP in Europe is the UK. The country is set to reach ‘peak cash’ in 2018, according to the Guardian, as cash payments fall to just 40% of total transactions. This number could fall as low as 21% by 2026.
The cash gap
At the moment, governments are stuck between piecemeal but positive regulation on blockchain and a general distrust of cryptocurrencies. Without the support of legislators, Bitcoin can not yet fill this cash gap.
Sasha Ivanov explains: “Restrictions on using cash are mainly aimed at making the financial system more transparent. While measures like [Australia’s] should not be punitive [to the average citizen] unfortunately in many cases that is what they are.”
It would be short-sighted not to expect more governments to follow suit and restrict cash usage over the next three to five years, Ivanov says, predicting that peak digitisation of money will happen some time between 2025 and 2035.
“That’s where blockchain kicks in, since it covers the need for security and transparency for everyone involved. Over the next 15-20 years blockchain will positively change today’s financial and governmental landscape.”