A senior representative of the Swiss National Bank (SNB) recently defended the use of high-denomination banknotes—namely the bank’s 1,000-franc note—claiming they offer many benefits compared to digital currencies.
On Feb. 27 at the World Banknote Summit in Basel, Switzerland, SNB Vice-Chairman Fritz Zurbrügg spoke about the future of cash.
“Its critics say that cash should be abolished, or that cashless alternatives will in any case gradually render it obsolete,” Zurbrügg said, “however, to paraphrase Mark Twain: Reports of the death of cash have been greatly exaggerated.”
‘TRIED, TESTED AND WITH A FUTURE’
“This is reflected in the continuing robust demand for cash on the part of the general public. In many countries, the value of cash in circulation relative to GDP has increased over the last few years; a development that can be attributed to occasional periods of heightened uncertainty about the stability of banks in the wake of the financial crisis. Another factor is the low level of interest rates on transaction accounts, and hence the low opportunity cost of holding cash,” said Zurbrügg, whose speech can be read in full here.
“Moreover, surveys and anecdotal evidence suggest that cash is still widely and readily used for payments. This might seem surprising at first glance, given the numerous alternatives to cash, but there are a number of reasons. For instance, people like to use cash for personal reasons, because it allows more effective budget control or because it does not require technical know-how. People’s tastes can change, yet cash has properties that cashless methods do not have to the same extent. It is more reliable, because it does not depend on the use of a technical infrastructure. It also offers comprehensive protection as regards financial privacy. Only the availability of cash guarantees that the data owner really has control over the decision on how much financial information to share, and with whom.
“In addition to these demand-side considerations, the SNB itself, as the supplier of banknotes, has no plans to do away with cash. The SNB is mandated by law to ensure the supply and distribution of cash as well as to facilitate and secure the smooth functioning of cashless payment systems. These tasks have equal status. By fulfilling both tasks, the SNB lays the groundwork for the public to choose its preferred method of payment for each individual transaction.
“Yet this freedom of choice between payment methods exists only if the public has confidence in both cashless payments and cash. Prerequisites for public confidence in cash are, first, a monetary policy which is geared towards stability and ensures that banknotes and coins retain their value over the long term. Second, banknotes need to be of the highest quality and have the best possible protection against counterfeiting. Switzerland’s new banknote series is a case in point. It meets high standards of safety, design and technology. After all, banknotes are also a symbol for the quality and stability of our currency, as well as one of Switzerland’s calling cards.”
‘NO PLANS WHATSOEVER TO DO AWAY WITH CASH
According to a recent report in the Wall Street Journal, Zurbrügg reiterated the bank has “no plans whatsoever” to withdraw cash from circulation.
“As the supplier of Swiss franc bank notes, the SNB thus takes the view that the reports about the death of cash are not just exaggerated—they are unfounded. The SNB has no plans whatsoever to do away with cash,” he told WSJ.
Canada began withdrawing its $1,000 banknote from circulation in 2000 in an attempt mitigate crime.