Global Trend Against Cash Intensifies as China Joins the Squeeze
By Lubomir Tassev
ActivistPost.com
NOVEMBER 16, 2019
For various reasons, a growing number of nations are experiencing the rapid development of cashless society. Paper money may become extinct in some countries in the not-so-distant future. Prompted by the spread of private and decentralized cryptocurrencies and the threat of losing control over their monetary policies, more and more governments are now working to create central bank issued digital currencies to replace banknotes and coins. China has joined the campaign against cash, although not at the expense of centralized monetary power.
China to Trial ‘Large-Scale Cash Management’
In a move that many consider part of Beijing’s plans to introduce a digital version of the national fiat, the yuan, the People’s Bank of China (PBOS) has revealed plans to implement pilot programs aimed at exerting greater control over cash transactions. According to a notice issued by the central bank, the trials will be conducted in three Chinese regions, the provinces of Hebei and Zhejiang and Shenzhen City, within the next two years.
In a report addressing fears that the initiative will restrict public access to cash, the state-run news agency Xinhua explained that despite the rapid development of non-cash payment platforms in recent years, the total amount of cash in circulation has remained at a stable level while large-volume cash transactions have in fact continued to grow. Besides, these have been concentrating in specific areas, groups of people and periods, arguably lowering the overall efficiency of cash flow.
PBOS shares its own reasons to implement the new control mechanism. Large amounts of cash are widely used in China, the bank points out, and they are exploited in criminal activities such as corruption, tax evasion and money laundering. The regulator will impose stricter supervision and introduce reporting requirements for cash operations over certain thresholds – 500,000 yuan (approx. $70,000) for public accounts, and for private accounts – 100,000 yuan in Hebei province, 300,000 yuan in Zhejiang province, and 200,000 yuan in Shenzhen.
“Under the requirements of large-scale cash management, banks need to deepen their understanding of current customers, strengthen risk warning and information communication for customers who are prone to generate large cash transactions, and guide them to use non-cash payment tools,” the Chinese central bank demands. It also proposes the establishment of a special registration system for large cash withdrawals, emphasizing that as long as a bank customer fulfills their obligations under the applicable rules, access to large sums of cash will not be restricted.
Other developed countries have already adopted regulations to increase control over cash flows and China is now trying catch up. After the new system is tested in the three regions, it is expected to form the basis of a long-term large-scale cash management mechanism. According to the Xinhua report, Beijing’s main motive is to “promote the concept of rational use of cash.” But the new focus on increased oversight over cash transactions may also be related to the plan to issue a digital yuan, one of the main purposes of which is to exert greater control over financial transactions.
Is This the End of Paper Cash?
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