Crypto adoption a likely beneficiary as Greece and Italy crackdown on black markets and tax evasion and take up a frontline position in the ‘war on cash’.
The Mediterranean nations of Greece and Italy have taken their place at the frontline of the global war on cash. New laws, ostensibly designed to crack down on black markets and tax evasion, are forcing citizens to transact electronically—which some suggest could lead to the adoption of cryptocurrency.
According to the measures, Greeks must spend a third of their income electronically, and Italians can only make cash payments up to a value of €2,000, which is expected to be reduced to €1,000 in 2022. If people refuse to comply, they are hit with hefty fines. Greeks failing to meet the electronic spending targets must pay a 22 per cent tax on the shortfall, and on the other side of the transaction, Italian retailers who refuse to accept credit cards now face a penalty of €30 + 4% of the payment value.
The main goal of the measures is to reduce tax dodging (once described by Greek politicians as a national sport) which is thought to have taken a turn for the worse as Greek citizens have shouldered the burden of austerity measures relating to repayments to Greece’s creditors.
Aside from casting light on the ‘shadow economy’ draining the Italian and Greek governments of revenue, the move towards a cashless economy resonates with a larger ideological movement that is sweeping Europe and the rest of the world.
Without the freedom of being able to pay in physical cash, people have no choice but to submit to surveillance and taxation. More pertinently, the government are given an iron grip on the inflows and outflows of the economy – which enables them to more easily implement negative interest rates.
Both the European Central Bank and the International Monetary Fund have spoken of plans to introduce negative interest rates, which they argue are necessary to jumpstart economies that have failed to respond to more traditional economic stimulus like quantitative easing.
In a cashless world, citizens have no way of removing money from the bank and storing it away from the steady erosion of negative interest rates, thus they are encouraged to spend and stimulate the economy.
But many believe locking citizens into negative interest rates is a dangerous economic policy. As Fabio Andreotti from The Foundation for Economic Education (FEE) suggests, negative rates can lead to bank runs as people choose to withdraw en masse and hold cash at home instead. And eventually, people are likely to adopt new forms of payment. "Banning physical cash would simply lead to the emergence of alternative means of payment that would outcompete official tender." writes Andreotti. "A lot of people would start using near-money substitutes."
Greece and Italy could be the ideal test cases for rolling out cashless policies across Europe, helping authorities to see if removing cash from the equation might help other countries avoid the problems experienced by pioneering negative interest rate adopters like Denmark and Japan.
Citizens forced to watch the value of their savings erode, however, might not see the benefit, and cryptocurrency enthusiasts have been quick to suggest that bitcoin—a deflationary asset—could be the answer to preserving wealth and storing value in cashless economies.
"Time for plan B in Greece too." tweeted Bitcoin expert Andreas Antonopoulos in reference to bitcoin. "The war on cash and the desire for surveillance and control just escalated."
When the Greek banks closed their doors for days on end during the debt crisis of 2015, a portion of the population looked to bitcoin for solace, and crypto exchanges across Europe reported increased traffic and registrations from the troubled country.
Though this episode was short-lived, Brave New Coin’s recent research report—The End of Cash—concludes that negative interest rates could eventually be the impetus for the sustained adoption of cryptocurrency.
Cryptocurrencies fitting into the category of ‘Anonymous and Selective Transaction assets’ —including privacy coins like Monero and Zcash—are likely to benefit the most from the transition to a cashless economy by replacing notes and coins with a digital form of cash that is equally able to perform daily transactions away from prying eyes.
Commodity-backed money, which includes cryptocurrencies exhibiting characteristics of commodities like bitcoin, is also expected to benefit from the transition by acting as a store of value in the new cashless world.