We publish below large excerpts from the speech of Fabio Panetta, member of the Executive Committee of the European Central Bank, delivered on June 15, 2021 in Frankfurt am Main at the International Monetary Conference of the Deutsche Bundesbank.
The future of cash was widely discussed even before the pandemic, in connection with the increasing use of digital payment tools. The crisis has increased interest in this issue. It reduced the time needed to digitize the economy — by 7 years, according to recent estimates — and changed consumer habits, re-proposing the question of the future of cash in a tech economy. I will explain in this post that digitization will not lead to the disappearance of money. In the Eurozone, banknotes will continue to play a crucial role in the future as well. Their demand has increased during the pandemic, although they are less used as a means of payment. The Eurosystem is committed to preserving the role of cash. We are taking concrete steps to ensure that it remains widely available and accepted as a method of payment, even if the digital euro is introduced.
(…) The apparent paradox of an increase in demand for banknotes and a concomitant decrease in cash payments can be explained by the use of cash as a tool to deal with the uncertainty resulting from the crisis. Recent analyzes indicate that at the beginning of the pandemic, consumers, especially those with low incomes, reduced their purchases of goods and services and increased the stock of liquid financial assets; This has increased the demand for cash. (…) Even the use of banknotes in the pre-crisis period confirms the importance of cash as a store of value, as well as as a means of payment. According to recent estimates, before the pandemic, only 20% of the total amount of euro banknotes was used for payments in the eurozone. The most widespread stake, equal to about 1,000 billion euros, will in fact be held as a store of value and only used sporadically to make payments or will be held by entities resident outside the eurozone. Therefore, it is assumed that the store of value function has contributed to supporting the demand for banknotes even at the stage of the sharp increase in digital payments. The demand for cash is also supported by the peculiarities of banknotes. Since banknotes are free of cost, they are sometimes the only way to ensure the financial inclusion of large segments of the population: for example, in the eurozone, there are 13.5 million adults without a bank account, making cash payments almost exclusively. The banknotes also allow almost anyone, including the elderly, people with visual impairments or other disabilities, to check the authenticity of the money they are using. Cash also plays a vital role in financial education, as children under the age of 15 use bills and coins for their small daily purchases.
Empirical evidence suggests that cash shortages will be detrimental to merchants and consumers, especially those on low incomes. Difficulties may arise in particular for segments of the population, such as the elderly or people with a lower level of education, who prefer cash over other means of payment. (…) Cash is also the most convenient tool for ensuring privacy in payments, an element to which consumers attach fundamental importance. As the digital economy expands, citizens’ concerns about the collection and use of their data are growing. Finally, euro banknotes are the most tangible sign, a symbol of European integration. (..) Its spread, however, could be compromised in the future. This can happen, for example, if banknotes are no longer widely accepted in commercial establishments. Therefore, the role of cash as a means of payment and as a store of value must be protected through active policies. For this reason, in September 2020, the European Central Bank’s Governing Council launched the Eurosystem’s 2030 Monetary Strategy, with four main strategic objectives. The first is to continue to ensure an adequate supply of cash. The second objective is to ensure that euro notes and coins continue to be accepted at points of sale and made available to consumers along with other means of payment. The third goal is to offer secure fiat currencies and the latest technology. The ultimate goal is to reduce the environmental impact of cash thanks to new products and processes. (…) We are also working with the European Commission to review its 2010 Recommendation on the Objectives and Effects of Legal Bidding for Euro Banknotes and Coins and to enact regulatory measures to ensure an adequate supply of cash-related services in the Eurozone. (…]The global economy is changing rapidly, but the Euro system will ensure that, even in the digital age, all European citizens have adequate and cost-free access to risk-free and privacy-friendly forms of sovereign currency that are legal tender and can be used anywhere In the Eurozone Our commitment to providing sovereign money in both physical and digital form will enhance the role of public money in the Eurozone, adapting it to the needs of the digital age while ensuring that cash continues to meet the needs of European citizens.
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