The Case for Cash

Discussion from the German Central Banks Perspective

Monika Moede, Representative Office Tokyo

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms.
The Case for Cash Discussion
The paper argues not to eliminate certain denominations of cash

Use of cash has several advantages

Anonymity
Acceptance
Easy to use
Free of charge for everyone
Immediate discharge of debt

Positive effects of its restriction not easy to realise

Less crime
Benefits of more flexibility for monetary policy (negative interest rates)

Ultimately, currently favourable to keep full spectrum of cash

Monika Moede, Deutsche Bundesbank Representative Office Tokyo

2nd December 2016
page 2
The Case for Cash Discussion
The paper touches possible consequences

Implications of elimination of cash for illegal employment and organised crime:

Plausible, however uncertain
Reactions could be different
Possible evasion by using other currency with high denominations
Effects of phasing out of 500 bills in 2018?

Discussion about specific effects of elimination of only high denominations

Different to entire elimination of cash?
Relevant for poorer households (no hoarding, low volumes)?
Costs of restricting freedom of choice?

Monika Moede, Deutsche Bundesbank Representative Office Tokyo

2nd December 2016
page 3
The Case for Cash Discussion
Bundesbanks perspective on the importance of cash

The Bundesbank promotes cash on following reasons:

Simple, safe, fast
Instrument of expenditure control and budget planning
In Europe the only legal tender
Can be used as far as possible without technical infrastructure for payments
and ensures the functioning of the payments in emergency and crisis
situations
Ensures anonymity and the user's self-determination right in information
It is central bank money

Therefore, the Bundesbank is advocating to retain cash

Monika Moede, Deutsche Bundesbank Representative Office Tokyo

2nd December 2016
page 4
The Case for Cash Discussion
Payment behaviour in Germany

Conclusions of study on the use of cash1) and discussion paper2)

Reason for demand for cash: only 10 % for transaction balances
(20 % hoarding; 70 % external demand)
53 % of turnover and 79 % of number of transactions
Poorer and unbanked households Share of cash transactions by number of
use the most cash transactions and turnover

high denominations beneficial Share of cash by ... number of turnover

transactions
for consumers

1) 3rd Study on the utilisation of cash and

cashless payment instruments
2) Discussion Paper No. 13/2014
Consumer cash usage: a cross-country
comparison with payment diary survey data

papers available at www.bundesbank.de

Monika Moede, Deutsche Bundesbank Representative Office Tokyo

2nd December 2016
page 5
The Case for Cash Discussion
Consequences not yet clear more research

Bundesbanks research on the use of cash suggests

Cash still most commonly used means of payment for purchases
Many cash transactions in Germany (and other countries) of high value

Nevertheless, Eurosystem decided to end issuance of 500 bills by end of 2018

Reason: concerns that this banknote could facilitate illicit activities

But, no analysis can proof that the elimination of high denominations would
result in less criminal activity

Monika Moede, Deutsche Bundesbank Representative Office Tokyo

2nd December 2016
page 6
The Case for Cash Discussion
Outlook

Bundesbanks research
4th study on the utilisation of cash and cashless payment instruments in 2017
Results expected in 2018

3rd Cash Conference of the Deutsche Bundesbank

25th to 27th April 2017
i.a. study on whether card payments lead to more unplanned spontaneous
purchases

Monika Moede, Deutsche Bundesbank Representative Office Tokyo

2nd December 2016
page 7