Preserving Cash in a Digital Age

Key Takeaways:

• Paper money accounted for just 20% of all transactions in 2024, down from 54% in 2009.
• The nominal value of money in the average Canadian’s wallet or purse has more than doubled since 2009.
• Bill C-2 proposes to toughen federal anti-money laundering laws by making it illegal to accept cash payments of $10,000 or more.
• Cash offers several benefits, including resiliency, security, and a hard-cap budget.
• Many Canadians, including the elderly and disadvantaged groups, rely on cash to survive.

Introduction to the Importance of Cash
In a world where digital transactions are becoming increasingly prevalent, Canadians are not yet ready to give up on cash. According to a recent Bank of Canada survey, paper money accounted for just 20% of all transactions in 2024, down from 54% in 2009. However, the nominal value of money in the average Canadian’s wallet or purse has more than doubled since 2009, and the typical emergency stash at home sits at $472. This suggests that Canadians still value cash and are holding onto it, even if they are not using it as frequently for transactions.

The Benefits of Cash
Cash offers several benefits that make it an essential part of our financial system. For one, it provides resiliency in the face of natural disasters or other crises that may disrupt digital payment systems. As Jay Zagorsky, a business professor at Boston University, notes, "If you use your cellphone to pay for everything, what will you do when the power goes out?" Cash is also a secure way to make transactions, as it is not vulnerable to hacking or cyber attacks. Additionally, cash provides a hard-cap budget, allowing individuals to only spend what they have on hand, rather than accumulating debt through credit card use.

The Proposed Ban on Large Cash Transactions
Despite the benefits of cash, the Canadian government is proposing to toughen federal anti-money laundering laws by making it illegal to accept cash payments of $10,000 or more. This proposal, included in Bill C-2, would also forbid "night drops," whereby businesses deposit their daily earnings in a secure mail slot after banking hours. However, this proposal has been met with criticism from businesses and individuals who rely on cash, as it would make it riskier and more complicated to deal in paper money. As Corinne Pohlmann, executive vice-president of the Canadian Federation of Independent Business, notes, "Banning night drops could actually increase the risk of crime, as businesses will have to keep their money in a safe all night, making it a more enticing place to rob."

The Impact on Disadvantaged Groups
The proposed ban on large cash transactions would also have a disproportionate impact on disadvantaged groups, including the elderly, low-income individuals, and those living in rural or remote areas. These groups often rely on cash to survive, as they may not have access to digital payment systems or may prefer to use cash for budgeting and financial management. As a 2023 report by McGill’s Max Bell School of Public Policy notes, "Twelve per cent of adult Canadians do not have a credit card and must rely on cash to survive." It is essential to consider the needs of these groups when developing policies related to cash and digital payments.

The Need to Protect Cash
Given the benefits of cash and the potential impact of the proposed ban on large cash transactions, it is essential to protect the use of cash in Canada. As Jay Zagorsky notes, "Canada is not going to eliminate terrorism, corruption, or money laundering by making cash less available, but it will make life more difficult for people who need to use cash." To protect cash, individuals can take steps such as using cash regularly, supporting businesses that accept cash, and advocating for policies that preserve the use of cash. As Zagorsky suggests, "Convince yourself and everyone you know to use paper money at least once a week. Buy something in cash. Anything."

Conclusion
In conclusion, cash remains an essential part of our financial system, offering benefits such as resiliency, security, and a hard-cap budget. While the proposed ban on large cash transactions may be intended to prevent money laundering and other illicit activities, it would have a disproportionate impact on disadvantaged groups and make it riskier and more complicated to deal in paper money. It is essential to protect the use of cash in Canada and to consider the needs of all individuals, including those who rely on cash to survive. By using cash regularly and advocating for policies that preserve its use, we can ensure that cash remains a vital part of our financial system for years to come.