The ECB recently launched a review of the €500 bill. In all likelihood, the €500 bill is about to vanish. Is this a first step in a war on cash or is this a war on money laundering?
ECB president Mario Draghi says Review of €500 Bill Not a War on Cash.
“The 500-euro note and this objective of limiting cash have nothing to do” with each other, the ECB president told European Union lawmakers in Brussels on Monday. “There is a pervasive and increasing conviction in world public opinion that high-denomination bank notes are used for criminal purposes.”
“The 500-euro note is being viewed as increasingly an instrument for illegal activities,” Draghi said. “It’s in this context that we are considering action on that front. Of course, we have to do it very carefully and in the best possible way.”
“500 euros is a huge number and we’re on a trend to make sure that we discourage fraud, that we discourage corruption and that we combat terrorism,” Luxembourg Finance Minister Pierre Gramegna said last week.
Even if the ECB withdraws the 500-euro note, people will still be able to hoard the next-highest denomination of 200 euros if they want, Draghi told the lawmakers.
War on Cash or War on Money Laundering?
Is this move by the central bank a war on cash or a war on money laundering?
To be sure, people and businesses hide cash for fraudulent purposes. But the primary reason behind fraud is insanely high taxes. The system itself openly encourages fraud.
Draghi’s move is also an attack on cash. People do not trust banks, and rightfully so. It’s easier to stash a stack of high denomination bills than lower ones.
“People will still be able to hoard the next-highest denomination of 200 euros if they want,” Draghi told the lawmakers.
He left off “until they can’t“. €200 bills will be the next to go.
For more on digital currencies and the pending ban on cash, please see Reader Asks About “Fedcoin”: Should the Fed Issue Its Own Bitcoin?
Mike “Mish” Shedlock