With the fervent wave of development ensconcing global economies of the world, the overwhelming goal stated by most is that of a “cashless society.”
Australia, is one such example, with the island country months from enforcing an actual ban on cash-based transactions over AUD $10,000. According to the country’s Liberal Party, beginning on 1 July 2019, all payments over the stated sum have to be made in cheques or through electronic transfers.
Despite the overarching goal of this legislation being to weed out the nation’s illicit tobacco trade, black market crime, and terrorist financing, citizens are set to bear the brunt of the cash exodus. With over 37 percent of all commercial transactions being made in cash, the switch to a cashless system will not be smooth or welcome, as many small businesses have pointed out that this ban will hurt their reserve collections which are constituted by cash alone.
Given the departure of large-scale cash-based transactions and the forced adoption of electronic payments, cryptocurrencies could thrive. Ever since the legislation was announced in May 2018, the crypto-community looked favorably towards Australia and with two months left for the ban’s eventual roll-out, the case has strengthened.
Several factors need to be examined carefully when dealing with the dichotomy of the outflow of cash and the inflow of digital money, not necessarily just crypto, as a thread on the r/Bitcoin subreddit explains.
From a purely quantitative standpoint, the purchasing power of the stated amount i.e. AUD $10,000 is not going to hold for a period of more than a couple of years or so. The impact of inflationary pressure on cash hampers its potential, unlike Bitcoin, which has a periodical protocol to cushion the inflationary effect on its halving and subsequent mining rewards reduction.
The same was pointed out by slvbtc, who stated,
“Slowly over time as inflation eats away at purchasing power it will become illegal to use cash for anything more than a car service.
This does nothing but strengthen the potential benefits of bitcoin. These draconian dystopian measures are the equivalent of promoting bitcoin.”
Another user, Aussiehash, suggested that this “war on cash” was nothing, but a latent ploy to force citizens to deposit their money in bank accounts, thereby allowing the banking elite to have control over the funds. He added that this cash ban will lead to savings being held in “fractional reserve banks,” which will eventually lead to negative interest rates being pushed.
Similar sentiments were raised by the International Monetary Fund in their February 2019 blog post titled “Cashing In: How to Make Negative Interest Rates Work.” Given the rallying cry of the cryptocurrency world against the power of central banks, coupled with the imminent Australian cash ban which could result in the same, the contents of the IMF blog particularly irked the crypto-community, especially,
“A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe recession. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depositors would have to pay the negative interest rate to keep their money with the bank, making consumption and investment more attractive. This would jolt lending, boost demand, and stimulate the economy.”
It can however, be definitely be argued that the AUD $10,000 baseline is fair as such a substantial amount will not be made in any other form apart from digital payments, certainly not cash. The point here is not the frequency of payments made over the stated amount, it is the government specifying an amount, one which they are free to tune as and when they want.
Further, the power of cash as an independent, quick, liquid form of payment will, according to many, vanish as the stated amount is lowered, either by legislation or the economics of inflation. Once this is done, transactions will have to be funneled via bank accounts or, as an alternative, through digital assets and that is where the opportunity lies. The same was stated by Taishan555,
“You miss the point. Once this law is made, the amount will be slowly (or quickly) lowered until the government decides that it’s just ‘easier to remove cash all together’. From then, no transaction will ever be private. This is where bitcoin will be a VERY useful alternative.”
Despite the forced adoption of digital payments and a possible channel for Bitcoin growth in Australia, some were not certain that decentralized currency would take the cake. In fact, Bitcoin and its virtual currency peers might not be the preferred option for many, with a form of digital fiat such as a stablecoin being the preferred, tethered, and relatively risk-free option.
Another user, btcwerks, alleged that this was a move to “digitize the fiat.” However, cryptocurrencies would have the last laugh, he added, stating,
“Let them digitize the fiat… push it even… digital fiat is inflationary, bitcoin is deflationary.
They need to use some “crypto” fiat solution down the road anyways once payments in bitcoin become easier… printed paper and minted coins are such a waste of resources, its easier digital and we all know it.”
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