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The Role of Blockchain in Cashless Economies

16 August 2019, 07:25
Votes: 1

The Australian authorities proposed to limit the size of cash payments, which should not exceed 10,000 AUD (around $6,750). The government expect this step to help to avoid tax fraud and popularize electronic payments among the citizens.

The Role of Blockchain in Cashless Economies

According to a draft bill, transactions that exceed the stated amount must be carried out by checks or via e-payment systems. These actions are to be taken in order to prevent money laundering in the country, as well as reduce the risk of being robbed on the street. Another reason for that is the government’s desire to regulate operations with cryptocurrencies.

Public debates on this bill lasted until August 12, so the process of its implementation has already started. According to the Ministry of Finance, the limit on cash payments will apply from January 1 of the next year.

Despite the possible tightening of cryptocurrency regulation, the cryptocurrency market is about to increase its customer base due to a massive shift to digital assets. Let’s review three more countries where cashless payments are about to become the only form of payment.

Sweden

As a vivid example of a country with a cashless economy, Sweden is not intending to stop its policy on reducing cash payments. Instead, the government seeks to entirely move away from paper money by 2023. Due to the fact that Swedes can pay cash only in 20% of shops, this trend will result in the total cash rejection in the future. Even today, the fear of bank robberies has almost completely disappeared.

This has been achieved through the efforts of the local authorities, the citizens’ involvement and the national mobile payment system implementation. By the way, more than half of Sweden’s population uses this system in everyday life.

Sweden’s acquiring system became the first one of that type among all European countries. It was created on the basis of Point – a company that provided related services. After Point had been bought by VeriFone (American company manufacturing payment equipment), it received all the resources needed to launch such an independent payment system. This system spread across Europe by serving 475 thousand retail outlets, as well as 42 European banks.

Sweden

In this Scandinavian country, you cannot pay cash for public transport because it would distract a driver and increase the risk of getting into an accident. Cashless payments are used everywhere (it concerns small business, as well as stores). There is even a special iZettle card reader designated for accepting bank cards via mobile devices. Taking into account the statistics on cashless payments in Sweden, Riksbank initiated the first Swedish cryptocurrency’s test launch.

E-krona is considered by the Bank of Sweden as another opportunity to bring the digital era closer to the country’s economy. After the test period, it will be decided whether this project has a promising future or not, as well as whether or not to continue developing the electronic krona.

Gabriel Söderberg, one of the Sveriges Riksbank’s senior economists, is not excited about the idea of the national cryptocurrency implementation and its further use as a payment tool but does not exclude the possibility of creating such e-currency by the Swedish government. According to him, cryptocurrencies should not be issued by the national government or promoted as a major form of payment. Nevertheless, he concedes that, in the future, digital currency may be used as a means of payment acknowledged by the governments. 

However, his negative attitude to cryptocurrencies does not apply to blockchain technology. Mr. Söderberg is convinced that it can be very useful in various industries. In his opinion, this technology could help to speed up payments and provide better transparency of monetary operations. That is why he expects blockchain to be integrated into payment systems all over the world.

Germany

Germany

At the moment, Germany does not have any limitations on the size of cash payments, but this is going to change soon. The first steps towards the restrictions were taken in February 2016, when the Ministry of Finance recommended to set the limit on payment transactions in cash in the amount of €5,000 (approximately $5600), and apply it to all EU countries.

The German government is not clear about adopting this initiative mainly because of the negative public reaction. However, such restrictions are to be implemented soon due to a serious revision of European countries’ monetary policy. This move is meant to increase the money flow control and prevent money laundering in the EU. With Germany’s policy to be reviewed, cryptocurrencies may come in handy.

According to a decree signed by the Ministry of Finance, Bitcoin is recognized as a currency. Furthermore, by its resolution, cryptocurrencies can be used as a legal means of payment in Germany.

According to the 2015 European Court ruling, Bitcoin was considered a currency in terms of taxation. Furthermore, a value-added tax is not applicable to this cryptocurrency in case of paying for services or goods by Bitcoin. However, each European country has the option of establishing its own rules, as well as implementing the specific policy regarding cryptocurrencies.

Canada

This country has achieved significant progress in its payment system development due to the governmental efforts aimed at increasing financial accessibility and the percentage of cashless payments. Canada uses its own debit card system (Interac), as well as international ones (MasterCard, Visa, and American Express). According to the forecast, cash transactions will account for only 10% of all country’s payments by 2030.

However, e-payments are not going to completely substitute cash operations in the near future. The Canadian authorities give their citizens the right to choose, because, for example, elderly people prefer using physical money. In addition, before cashless payments full implementation, the system must be fully tested for a high level of reliability, as well as protection against cyber-attacks.

Canada

In 2018, the Bank of Canada conducted a study on a cashless society, which showed the possible impacts of that concept on the country. Based on its results, three political models were proposed:

  • Do not restrict cash payments, but take measures aimed at reducing their number over time.
  • Regulate payment networks to have full control over the country’s monetary system.
  • Start issuing a digital Canadian dollar (not a cryptocurrency) to compete with other payment networks.

According to another study carried out in Canada, the central bank’s cryptocurrency would have a positive influence on the economy. Issuing of this cryptocurrency will lead to consumption growth in the country by 0.64%. The Bank of Canada’s earlier research confirmed that any currency can be digitized and converted right away. By the way, some of the Canadian banks have already used blockchain technology in traditional payments, and it has proved to be effective.   

Expectations

It is a common practice now to leave a wallet at home and use a credit card or a smartphone to pay for products at a shop. The technology development opens up new prospects in cashless payment, and blockchain usage can give a new impetus to the promotion of cashless operations and payment systems.

Today, it is clear that cash will soon disappear, but will cryptocurrency become a new international means of payments? It depends on what advantages it will give to the economies of different countries.

As mentioned earlier, the United States is considering blockchain as the technology that can help to improve one of the country’s industrial sectors.

Read more: Cryptocurrency: Where to Start?

Read more: Ron Segev dwells on the Blockchain in Casino Industry

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