Taking money out of the bank becomes a Kafkaesque nightmare. Anyone looking to withdraw more than $3,000 of their own money must notify the State in advance as well as explain the reason(s) why, or face fines.
It was only eight days ago that Spain suffered its biggest blackout in recent history. As we reported on the day, without the widespread culture of cash use in the country the chaos would have been far worse:
Unlike some other parts of Europe, cash is still King in Spain, albeit a slightly diminished one, accounting for 57% of in-store payments, according to the Bank of Spain’s latest annual household survey. As such, most local people were able to make emergency purchases and many customer-facing businesses were able to continue operating. I cannot imagine the sort of chaos that would reign if something similar were to happen in my native United Kingdom, where the overwhelming majority of people do not use cash, or in cashless Sweden, where the amount of cash in circulation is equivalent to around 1% of gross domestic product — compared to 8% in the US and more than 10% in the EU.
It is fear over exactly this kind of eventuality that has prompted governments and central banks in Scandinavia to try to reverse the public’s mass abandonment of cash that they themselves helped set in motion many years ago. As Sweden’s Riksbank warned last year, rapid digitalisation has made payments “more vulnerable to cyber attacks and disruptions to the power grid and data communication”.
Put simply, cash saved the day — a message that has been reported throughout the Spanish media over the past week. Those who didn’t have cash on them or at home suddenly found themselves trapped in an economic limbo, reports the right-leaning La Razón :
This technological “fade to black” has reopened the debate on the need to preserve cash, considered by some to be expendable…
Monday’s blackout highlighted the fragility of a completely digitised system. People trying to pay for a bus ticket, a loaf of bread or a taxi suddenly realised they did not have a single euro in their pockets. The ATM network did not offer a solution either, as it was also paralysed. The image of citizens rummaging for forgotten coins, asking strangers for help or asking for credit [from local businesses] reflects the degree of current technological dependence.
[T]he day after the blackout, long queues of citizens could be seen waiting to withdraw money from ATMs out of fear that the situation experienced hours earlier would be repeated.
Spain’s biggest financial newspaper, Expansión, notes that “cash, the most common payment method in Spain, has become the plan B option in emergency situations like the blackout”. The left-leaning El Diario highlights one of the main lessons of the blackout: “you have to carry cash with you”. The blackout “has reopened the debate on the importance of cash, which became the only real way to acquire basic products and services”, writes El Confidencial while El Periodico gave the final verdict: cash is “clearly still necessary in our daily lives”.
However, Spain’s Pedro Sánchez government, which is on a mission to squeeze the life out of cash, appears to have other ideas.
In June 2020, at the height of the COVID-19 lockdown, Moncloa presented a non-legislative proposal advocating for “the gradual elimination of cash payments” as part of plans to increase tax collection and combat the black economy. Since then, it has slashed the national cash payment limit from $2,500 to $1,000, one of the lowest levels in Europe. To its credit, it did respond to nationwide protests in 2022 against bank branch closures and the proliferation of cashless businesses by obligating retail establishment to accept cash payments.
But the long-term goal of the Sánchez government is to take cash down. Just before the blackout, it unveiled plans to take the criminalisation of cash to a whole new level. Spain’s tax agency implemented a raft of anti-money laundering measures including one stipulating that anyone planning to withdraw more than $3,000 of their own money from the bank must notify the State in advance, or risk facing punitive fines. They must also explain to their bank, and by extension the government, the reason(s) for the withdrawal. From El Diario:
A new regulation has already come into force that tightens control over bank withdrawals. The Tax Agency has established that citizens and companies must notify in advance if they plan to withdraw large amounts of cash. If they do not do so, they will face penalties that can reach €150,000, depending on the seriousness of the infraction. This measure is part of the Government’s recently launched plans to combat tax fraud and money laundering.
According to the Treasury, withdrawals that exceed certain thresholds must be communicated through a specific procedure. Financial institutions will also have the obligation to report suspicious transactions.
The obligation to notify the Tax Agency of a cash withdrawal applies when the amount to be withdrawn equals or exceeds €3,000. Notice must be given at least 24 hours before carrying out the operation… For operations exceeding 100,000 euros, notice must be given at least 72 hours in advance.
The regulations establish that the notification must include data such as the amount being withdrawn, the purpose of the withdrawal, the identity of the customer and the final recipient of the money if the two are different. If this obligation is not complied with, it is considered a serious infraction. In the event of a withdrawal being detected without prior notice, a penalty may be imposed that varies between 1% and 10% of the amount withdrawn, with a minimum of 600 euros and a maximum of 150,000 euros.
The notification must be filed through the tax agency’s official website using a digital certificate, Cl@ve PIN, or electronic ID card. If approved, the bank customer will then receive a receipt that must be shown at the bank when withdrawing his or her cash. On Banco Sabadell’s website, customers are advised that if they need to withdraw more than €3,000 at once, the bank will ask for proof of the reason for the withdrawal. This receipt is then sent to the Tax Agency and the Bank of Spain.
Back to the article:
This measure also relies on the active collaboration of banks, which must temporarily block operations if they detect that the requirement of prior notification has not been met. In addition, they must send periodic information to the Treasury on cash movements that exceed the established thresholds. The spotlight is also on repeated operations for lower amounts, such as withdrawals of €800 or 900 €euros, which could raise suspicions if they are not properly supported.
Until now, withdrawn amounts of €3,000 euros or more only had to be reported by the bank in question to the Spanish central bank, which in turn reports them to the tax authority. These reports will presumably continue to take place.
But it’s not just the money coming out of bank accounts that the government wants to know all about; it also wants to know about the money going in to them.
According to El Español, the Spanish Tax Agency will be requesting proof of the provenance of funds if an amount equal to or greater than €3,000 is deposited in a bank. If a bank customer deposits smaller amounts across different days, it will also be considered suspicious. If the provenance of funds cannot be demonstrated in a satisfactory manner, the Tax Agency reserves the right to impose fines of up to 150% of the money deposited, with maximum fines of up to €150,000 in the most serious cases.
The Bank of Spain recommends keeping all the receipts, contracts and any other type of documentation necessary to explain the origin of the money that we deposit in the bank or what we are going to use it for if it is withdrawn.
Interesting Timing
This is all happening as the European Union gears up to launch its central bank digital currency, the digital euro. As we reported in late March, the two main EU authorities driving the rollout of the digital euro, the European Central Bank and the EU Commission, are keen to bring forward the launch, even as most Euro Area citizens surveyed on the matter seem broadly disinterested in their proposed CBDC.
As previously mentioned, it is not easy to sell a project that is broadly seen, even by many politicians and some central bank insiders around the world, not only as a “solution in search of a problem” but one that is fraught with risks. Even the German MEP appointed to lead the European Parliament’s legislative push for a digital euro, the Rapporteur Stefan Berger, became one of its fiercest critics, eventually stepping down from the role.
And there is plenty to criticise about the proposed digital euro, including the threat it would pose to financial privacy, particularly in a world where cash has been totally eliminated, as the Spanish government seek to achieve; the way programmable currencies like the digital euro could be used not only to monitor our spending but also control it; and the fact that the digital euro will almost certainly go hand in hand with the EU’s digital identity wallet, allowing for the creation of an almost perfect digital control grid.
Combining digital currencies with digital IDs while phasing out, or even banning, the use of cash would grant governments and central banks the ability not only to track every purchase we make but also to determine what we can and cannot spend our money on. They could also be used to strongly encourage “desirable” social and political behaviour while penalizing those who do not toe the line.
As the German financial journalist and cash advocate Norbert Häring puts it, the only discernible function of the digital euro is to “help displace cash and bring Europe closer to total digital surveillance.”
Spain has seen a flurry of articles in the mainstream media over the past few days arguing that the proposed digital euro would have fared well during last week’s blackout since it will apparently be able to function both online and offline (while apparently also not needing electricity). The ECB and EU Commission are currently trying to sell the project to the EU citizenry, and their ostensible representatives in Brussels whose support they will need in the European Parliament’s vote on the definitive legal framework for the digital euro in October.
One popular argument in favour of the proposed CBDC currently doing the rounds is that a digital euro would allow Europe to defend itself not only against the stablecoins being let loose by the Trump administration’s hands-off regulatory approach but also the US card duopoly that dominates the global payments landscape, Visa and Mastercard…
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Nick Corbishley 