Cuba’s cashless measures backfire on businesses
New anti-cash restrictions set by Cuba’s government are backfiring on businesses, says a Reuters report.
Earlier this month the Diaz-Canel administration announced new measures to transition the country to a cashless system, including a 5,000 peso ($20) daily cash withdrawal limit. This has proved disastrous for Cuban businesses who rely on goods and services from abroad, particularly developing entrepreneurs.
But the new rule has also had the opposite effect of what was intended: companies are insisting on transacting in cash to avoid losing access to paper money, which is now scarcer than before.
Now small business owners like Pilares Construccion founder Yulieta Hernandez find themselves being asked by their suppliers to be paid in cash and being told by the government they cannot do so.
"Right now the effect. . .is like paralysis," Hernandez said. "People are waiting to see. . .if a solution is found for the problems [the rules] have created." She added that many businesses are already freezing investments.
Cuba’s cash restrictions follow similar decisions by other countries like Nigeria, which has been trying to force its citizens to use central bank digital currency (CBDC). A CBDC is a digital currency issued and governed by a central bank, allowing the government to keep records of all taxpayers’ transactions.
Nigeria’s central bank debuted Africa’s first CBDC in late 2021 but the digital currency was given a cold reception as less than 0.5% of Nigerians used it. To try coaxing citizens into adopting CBDC the Nigerian government removed restrictions that required bank accounts to use CBDC. When that didn’t work the government offered discounts on cab fares if riders used CBDC to pay.
When neither of those worked the Nigerian government launched a war on cash and restricted cash withdrawals to 100,000 naira ($225) per week for individuals and 500,000 naira ($1,123) for businesses. At the same time, the government also decided to redesign the currency, which limited banks’ cash reserves while they waited for the newly designed currency.
Nigerians erupted in protest over the cash restrictions, but the government is doubling down. Central Bank of Nigeria Governor Godwin Emefiele said: “The destination, as far as I am concerned, is to achieve a 100% cashless economy in Nigeria.”
Israel is also trying to phase out cash, even restricting the amount of cash an Israeli taxpayer can keep at home.
While the State of Israel mentions money laundering and tax evasion as justifications for these laws, they are not the only factors. The government also aims to control how taxpayers spend their money and ultimately phase out cash altogether, allowing only digital payments.
“The Law for the Reduction in the Use of Cash was designed to change the public’s consumption habits and encourage a switch to digital means of payment, with a view to almost complete replacement of the use of cash in the future,” reported Globes.
In Australia, banks such as Commonwealth and ANZ are phasing out cash at their branches. More than a billion notes in cash have disappeared from circulation in Australia over the past twelve months, reports Sky News.
