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Going Cashless

By Margarita Bozhinova



This article was featured in JMBR's Fall 2016 print edition.


In Europe, settling an everyday transaction with a €500 bill, or even a €200 one, is likely to earn you a funny look, as these notes are considered to be the transaction method of choice for criminals. That’s why, in May earlier this year, the European Central Bank decided to stop issuing the €500 note, casually referred to as the “Bin Laden.” Banknotes, especially in high denominations, are believed to facilitate illegal transactions, not only in the country where they are issued, but elsewhere as well. This adverse effect generally extends to the currencies of advanced economies, which are considered useful for crime since their value tends to be higher than the one of equally denominated bills from developing economies. For example, the size of a foreign country’s informal economy tends to correlate with its demand for US banknotes, as the currency is commonly used for underground transactions.


Part of what makes cash attractive in the context of illegal transactions is its lack of inherent transaction record. This is why cash is believed to play a central role in tax evasion, especially for small businesses. It does not leave any evidence of the exchange, letting the business owner pocket the cash without reporting the transaction to fiscal authorities.