The Australian Government is proposing to enact legislation so that it would be a criminal act if one of its citizens used cash for transactions worth more than $ 10,000.It is estimated that cash is used illegally for about 3% of the country’s Gross Domestic Product GDP - Aus$50 billion.
In Europe, the European Central Bank (ECB) announced it would end the production and issuance of its €500 note by the end of 2018. While in France cash transactions above €1,000 are banned, the same is true in Spain for €2,500+ and in Italy, over €3,000.
A report issued in May 2019 claims “that in Europe, GDP of European countries are underreported by 19% because of unrecorded shadow economy activities” The use of cash no doubt lubricates much of these “shadow activities”.
It is of little surprise that governments are encouraging transactions to ‘go-digital’ and reduce the amount of cash its citizens use for buying and selling of goods and services.
Another area that concerns governments is the debt and bond markets, given their huge size and potential impact on economies.
Source: Institute of International Finance
The Institute of International Finance claims the world’s debt is approximately $244 trillion, i.e. three times the size of the global economy. There is increasing evidence that the bond markets are becoming digital, as we have seen yet another bank, this time Europe’s fifth-largest Santander, issue a $20 million bond on a blockchain. As Finextra described, “Santander Securities Services is acting as tokenization agent and custodian of the cryptographic keys”.
Given the economic uncertainties globally and ultra-low interest rates, after a quiet summer bond markets in September have been very active with over $140 billion of corporate bonds being issued in just the first week, as reported by the FT. Therefore, if more institutions follow the lead of Santander, BVVA, Commonwealth Bank of Australian, The World Bank, Société Generale - the list goes on - we are likely to see more bonds being issued on blockchains and further digitising of this asset class.
