Should Governments Restrict Cash?

Publication Date

November 2018

Document Type


Publication Title

Cato Institute: Policy Analysis NO. 855


Central bankers and mainstream monetary economists have become intrigued with the idea of reducing, or even entirely eliminating, hand-to-hand currency. Advocates of these proposals rely on two primary arguments. First, because cash is widely used in underground economic activities, they believe the elimination of large-denomination notes would help to significantly diminish criminal activities such as tax evasion, the illicit drug trade, illegal immigration, money laundering, human trafficking, bribery of government officials, and even possibly terrorism. They also often contend that suppressing such activities would have the additional advantage of increasing government tax revenue.The second argument relates to monetary policy. Proponents maintain that future macroeconomic stability requires that central banks have the ability to impose negative interest rates, not only on bank reserves, but on the public’s money holdings as well, and this can be accomplished only by preventing the public from hoarding cash.