Legal Seminar, Denver, CO

071018 Discussion Draft

4% of the total. See id. The Eurozone has about 10% of GDP in cash, whereas Japan has about 18%. (This compares to more recent estimates by the Federal Reserve of about $1.59 trillion in federal reserve notes as of March 2018. See https://www.federalreserve.gov/faqs/currency_12773.htm ). d. Government profits from cash (seigniorage) whenever interest rates are positive. Excess cash is thus good for government, except when the cost of producing it exceeds the potential profit (as in the case of many coins). e. When cash facilitates criminal activity, these enforcement efforts may also merit attention in formulating cash policies. o Some policy discussions involve reducing circulation of large bills, making it more difficult for criminal enterprises to move large sums of cash. For example, the 500 Euro note is being phased out by the end of 2018. $1 million in US could be moved with only 5 pounds of Euros, vs. 22 pounds of U.S. $100 bills. See Jack Ewing, Europe to Remove 500-Euro Bill, the ‘Bin Laden’ Bank Note Criminals Love (May 4, 2016). https://www.nytimes.com/2016/05/05/business/international/ecb-to- remove-500-bill-the-bin-laden-bank-note-criminals.html o If currency elimination/reduction is done poorly, unintended consequences can include harming the poor (e.g., India, which lacked adequate banking facilities to facilitate currency exchange). o Even if done well, the emergence of new technologies may diminish the effectiveness of eliminating cash as an alternative payment source for large volume transactions. f. Electronic payment systems usually require cash to be deposited somewhere, thereby bringing at least some participants within the reach of government regulation. o Sweden has announced policy intentions to move toward a cashless economy, with considerable progress in the marketplace. https://www.cnbc.com/2018/05/03/sweden-cashless-future-sounds- alarm-bells-for-the-central-bank.html . o However, in recognition of the practical utility of having cash in circulation, Swedish banks have to maintain minimum stores of cash in order to serve customer demand. Among other things, risks associated with a crash of payment networks don’t impact cash. And some citizens claim to have a natural right to use their domestic currency for purchases, even if many in the merchant space choose to go cashless. g. Cryptocurrencies present new challenges. Their use potentially circumvents traditional monetary policies affecting fiat currencies. Consumer protection efforts also face challenges. For example, securities laws don’t fit well here; neither do traditional safety/soundness regulations directed at actors within the government’s jurisdiction. Decentralized authority limits opportunities for control, relegating regulatory efforts to certain “choke” or “pressure” points.

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