The European Central Bank recently stated, in relation to a Swedish draft bill to protect the use of cash, that countries should take “appropriate measures to ensure that credit institutions and branches operating within their territories provide adequate access to cash services.”
That’s not something you see everyday, especially in the increasingly cashless world in which we live. While many countries and regions around the world are moving away from cash to more and more innovative payment methods (including contactless payments, biometric authorization, mobile wallets and more), the EU seems to be doubling down on cash.
The comments are especially instructive, considering the overwhelming expectation that the EU will become completely cash free in the near future. As Yves Mersch, member of the ECB’s executive board notes, “last year alone [in 2023], five Member States consulted the ECB on measures to limit the use of cash. This represents a sharp increase compared with the number of consultations on this topic in previous years.”
However, the ECB has made it quite clear that cash continues to be a core pillar of the EU’s financial system and they are “committed to cash and to ensuring that paying with public money is always an option.”
In my opinion, the ECB makes several great points in defense of this position, and the most important to me is the argument that cash preserves the financial inclusion and freedom of many individuals, especially the elderly, disabled, socially vulnerable, minors and immigrants.
Cash preserves financial inclusion and freedom
“Cash is an important part of your freedom to choose how to pay and essential for the financial inclusion of all groups in society. Our cash strategy aims to ensure that cash remains widely available and accepted as both a means of payment and a store of value”, says the ECB.
In terms of its preservation of freedom, the ECB notes that cash enables the exercise of many fundamental rights, including the rights to privacy, informational self-determination, freedom of action and freedom of speech. How does cash enable these rights?
One instance is the reality that, too often, payment through electronic means implies submitting oneself to state surveillance and incursions into one’s privacy. Cash provides an option to protect oneself from third parties or government agents being able to track any and every financial transaction one undertakes.
Of course there’s a counter argument that, used in this manner, cash may facilitate illegal or criminal conduct. However, it’s arguable in turn that the focus should then be on preventing or fighting criminal activities, not cash. As Mr Mersch notes, “cash must not be made the scapegoat.” We can, and in many cases already do, have measures in place to limit or prevent the success of bad actors in using cash for criminal acts.
Another important point is the fact that cash ensures equality and financial participation. It’s critical to protect the access to and use of cash by people whose financial participation would otherwise be made unduly onerous without the option to pay with cash. An instance of this is how cash enables the socially vulnerable to undertake financial transactions without facing the barriers in applying for credit cards, opening current accounts etc.
Ultimately, there are many legitimate reasons why countries may argue for limits to the use of cash, especially for significant transactions. However, it’s unlikely that any society can go completely cashless, not with the way our societies are currently structured and with the currently available technology.
