How did Brazil, a country that until recently was heavily dependent on cash, reach a point where its politicians are now considering eliminating it altogether? The most likely answer is a three letter word: Pix.
It is interesting to watch the starkly different approaches being taken by governments around the world when it comes to managing the role of cash in today’s rapidly digitising economies. The government of Sweden, one of the world’s most cashless economies, has passed legislation to protect access to cash while neighbouring Norway is considering strengthening the right to use cash in retail settings, after cash usage in both countries has dropped to an alarming low.
Slovakia’s government has enshrined the right to pay in cash in the national constitution. Other governments, including Switzerland’s and Austria’s, could end up doing the same. In the US, the state of Florida has passed legislation seeking to prohibit the use of a federally sanctioned central bank digital currency as money. Italy’s Meloni government has raised the ceiling for cash payments to €5,000, from €2,000, despite sharp criticism from the Bank of Italy and the European Commission. Austria refuses to place any ceiling at all.
Other governments, like the UK’s, are happy to stand by and watch as cash dies a slow, quiet death at the hands of the banks, tech giants, fintechs, big box retailers and payment processors. In Australia, the big banks are withdrawing cash services from many of their branches and imposing all sorts of restrictions on cash withdrawals without even a whimper of complaint from the government or regulators. As in the UK, a public backlash is brewing.
Calling for an End to Cash
In Ukraine, one of Europe’s most cash-dependent economies, the Zelensky government has unveiled plans to eliminate physical money altogether, as part of a hare-brained scheme to stamp out rampant corruption. Zelensky is reportedly “very determined” to move Ukraine, a country still suffering from waves of rolling power blackouts and internet outages, towards a cashless economy as swiftly as possible. And he apparently has the full support of Australia’s richest man.
Latin America’s largest economy, Brazil, may be on a similar path, with probably greater likelihood of actually reaching the destination. Last week, it was revealed that the country’s Chamber of Deputies is mulling a number of legislative proposals calling for an end to the printing, minting and circulation of physical notes and coins. According to Brazilian online newspaper R7 Notícias, three of the bills in question call for all financial transactions to be exclusively digital as demand for physical currency dwindles.
The first proposal, presented way back in 2016 by deputy Gilberto Nascimento of the Social Democratic Party, seeks to eliminate the use of coins and cash bills completely. All financial transactions, it says, should be carried out virtually, through applications and electronic platforms. The bill is under consideration by the Constitution, Justice and Citizenship Committee.
The second proposal, tabled by Paulo Ramos in 2020, a former deputy of the Democratic Labour Party, prescribes a more incremental approach. First, the three largest denomination bills (R$50, R$100 and R$200) should be abolished, and then over the next two years the remaining banknotes and coins should be gradually phased out, This project has been under discussion in the Finance and Taxation Committee since last year.
The third proposal, also from 2020, is under the purview of the Economic Development Commission. Proposed by Reginaldo Lopes, the current leader of the governing PT caucus in the Chamber of Deputies, recommends setting a “deadline for the elimination of all production, circulation and use of cash and that all financial transactions after that date take place only through the digital realm.”
The Power of Pix
Although all three of the proposals were presented by current or former members of Brazilian President Luiz Inácio Lula da Silva’s PT party or its coalition partners, it is not clear, at least to me, what Lula’s government’s position is on the future of cash.
Nonetheless, one can’t help wondering: how did Brazil, an emerging market economy that was heavily dependent on cash until just three years ago, reach a point where the amount of cash in circulation is steadily falling and at least three legislative committees are considering proposals to eliminate cash altogether in the not-too-distant-future? The most likely answer is a three-letter word that has rapidly become ubiquitous throughout Brazil: Pix.
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Nick Corbishley 