The Proposal will prohibit R$100 and R$200 bills; restrict the amount of cash people use to increase digital transactions, and prevent crime.
The proposal under review by the Brazilian Congress is bold, as it targets high-value cash notes. PLP 214/2020 is one of the bills that was drafted by Deputy Paulo Ramos. This aims to stop the emission and circulation of R$100 and R$200 banknotes. It further seeks to limit cash transactions, encouraging digital payments as normal.
This legislation would restrict the physical currency to the smaller denominations of R$2, R$5, R$10, and R$20 in Brazil.
It provides a schedule of 12 to 24 months over which these huge notes are to be eliminated in their daily use. Five years later, the entire financial transactions would be digitalized.
Why the Push Against Large Bills?
The supporters of the legislation claim that the high-value notes promote illegal business. They emphasize that R100 and R200 notes are frequently employed in corruption, money laundering, as well as the informal economy.
In eliminating these notes, the government wishes to eliminate easy sources of cash used to commit crimes.
This move has the backing of international examples. Sweden and Denmark have massively eliminated cash reliance by making use of digital payments.
The central bank of Brazil believes that this will lower the cost of handling the currency, besides modernizing the financial system.
Analysts observe that the step also promotes transparency in the financial arena. High-value cash transactions are difficult to trace.
Through digital transactions, audit trails are left and these aid in the detection of illicit operations.
The Implication of this to Brazilians.
Although the purpose of the proposal is to tighten the belt around criminals, it poses a question regarding the availability of financial services to the citizens of the country.
In Brazil, not all people have access to banking and digital payments. The bill stipulates that the Central Bank should make sure that every group can use secure digital transactions.
The gradual elimination will allow the populace to ease into it. Holders of R$100 and R$200 will be given six months after the publication of the law to redeem them at the banks. This is a slow process that seeks to reduce disruption.
The bill incorporates the digital currency as well. It formally accepts the provision of Central Bank Digital Currency (CBDC).
This goes hand in hand with intentions to modernize the monetary system in Brazil and use the digital financial infrastructure.
There will also be restrictions on the amount of cash that can be transacted in banks or paid through cheques.
Higher values will need to be carried out electronically, which will be done through regulatory authorities such as the Central Bank and the Monetary Council.
Source: https://www.livebitcoinnews.com/cash-ban-looms-r100-r200-notes-could-disappear/
