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June 2023

EDITORIAL: Cash remains King in times of rising inflation and growing uncertainty

An online article recently cited anecdotal evidence of university students stuffing cash into their wallets at the beginning of each week as a way of budgeting for the week’s living expenses. This is somewhat paradoxical when you consider this cohort’s extensive use of digital technology. It is also another example of how cash plays such a critical and often unrecognised role, particularly when the rising cost of living makes it very difficult to just get by.

But it’s not only students who benefit from the demand for, and use of, cash. As we have so often reminded policymakers, other low-income groups are similarly in need of cash to help budget and make ends meet.

The tech-savvy student cohort would explain that while they are significant users of technology in their everyday life, it doesn’t create the discipline that cash can i.e. I withdraw a specific amount at the beginning of each week, allocate the cash to certain expenses and place it in my wallet with the ‘forced‘ discipline that I can only spend what I have allocated and is available.

While it is unlikely that policymakers are ignoring the needs of the different cash-dependent groups within society, they must recognise that as pressure increases to move to digital transacting at all levels including retail and particularly financial institutions, the people who rely on cash cannot be left behind.

As governments and central banks make pronouncements about creating a centrally-controlled digitally currency, they must ensure that the inevitable implementation programs provide for those who, for a myriad of reasons, must still have access to the medium that helps them live in these high inflationary and uncertain times – Cash.

Legal tender status for CBDC and cash – implications for access and acceptance

Martina Horakova, Managing Director, International Mint Industry Association (IMIA)

What unites the majority of plans and research into potential central bank digital currency (CBDC) across many jurisdictions is the repeated commitment that a CBDC would complement rather than replace physical cash. This is indeed the case with digital euro. “With cash, central banks already provide a means of payment that is risk-free, widely accessible and easy to use, and that leaves no-one behind. But the rapid digitalisation of our economies requires us to complement cash with its evolution in the digital sphere: a digital euro,” said Fabio Panetta, Member of the Executive Board, European Central Bank, in an April speech to the European Parliament.

Panetta addresses the legislators in regard to the legal tender status of a potential digital euro and further notes: “People would have no obligation to use the digital euro. But they should always have the option to use it. Just like they do with cash today. […] But if we want the digital euro to replicate these cash-like features, we need a proper regulatory framework. Legislators assigned the legal tender status to euro banknotes in the Treaty, and this is why citizens can use them throughout the entire euro area. They are tangible proof that we share a single currency.”

The IMIA is also of the view that for a retail CBDC to be a successful central bank public money payment option, in terms of wide adoption by, and attractiveness for consumers, including convenient access to and mandatory acceptance of needs to be guaranteed. However, the IMIA also cautions that in order for the retail CBDC indeed not to replace cash and governmental bodies not to be seen as unequally pushing citizens to adopt CBDC as displacement of physical cash, both types of central bank public money need to be equally supported and provided with a level playing field in terms of regulatory measures.

Legal tender status of euro cash needs to be consistent with the related initiative on the digital euro. Euro cash is central bank public money that is already known, trusted and adopted by citizens with infrastructure in place. While preparing and dedicating new resources and new investments for developing and then maintaining digital euro infrastructure, it is equally important to do so for euro cash infrastructure. To take measures to preserve sustainable and future resilient level of cash infrastructure, as well as invest in re-development where cash services have already, or are at risk of, deteriorating beyond secure and sustainable levels, and so rectify absence of oversight.

Panetta notes that “Individuals and merchants will expect to be able to obtain digital euro at their banks, just like they do today with cash. […] While the main objective of legislative measures related to cash is to preserve its widespread use and availability, for the digital euro the goal would be to establish its use and availability from scratch.” Yet, what citizens and merchants are increasingly facing in several eurozone countries is deterioration of cash services ‘at their banks’, in terms of both distances and fees, impacting not only access to cash, but also acceptance of cash by merchants.

Euro cash as a type of central bank public money payments product possesses unique attributes not replicable with digital euro: cyber-resilient personal data safety and privacy, universal inclusivity, crisis-resilience, unlimited store of value function, and tangibility and physicality giving citizens self-reliant autonomy. Physical cash also crucially already possesses off-line instant settlement functionality, while the most recent ECB report from the digital euro project notes: “The question remains as to whether an offline solution that fulfils the Eurosystem’s requirements and achieves the necessary scale can be delivered in the short to medium term with the existing technology.” Retail CBDC is, in jurisdictions where launched, so far experiencing significant difficulties with consumer adoption. “Central banks that were first to roll out CBDCs have recently faced challenges that have hampered implementation. Additionally, recent instability in the global crypto assets market has amplified concerns and the need for a careful review of the innovation and technology risks,” the Central Bank of Kenya recently stated.

Policymakers need to ensure that consumers and citizens do indeed always have the democratic freedom and crucially individual decision-making autonomy to make their own payment method choices between the two types of central bank public money – digital and physical. This means equal treatment in terms of legal underpinning for wide access and acceptability of both euro cash and digital euro. Failure to do so could be seen by citizens and taxpayers as both imprudent and undemocratic.

Cash as the type of central bank public money already utilised and trusted by the public needs to be granted equal, if not superior, legal tender status to a potential digital euro. So that indeed, people do have a guaranteed option to use cash today in a reliable and uniform way across the eurozone, as they might one day with a potential cash-like digital euro.

Sources

‘A digital euro: widely available and easy to use’ – Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament Brussels, 24 April 2023 https://www.ecb. europa.eu/press/key/date/2023/html/ecb. sp230424_1~f44c7ac164.en.html

“Appropriate regulatory measures, including granting the digital euro legal tender status, should be considered in order to ensure consistency with cash and to make digital central bank money widely accessible for retail use to all end-users in the euro area, whilst taking into account the distribution of the costs and required technologies.” https:// www.consilium.europa.eu/en/press/ press-releases/2023/01/16/eurogroup-statement-on-the-digital-euro-project-16- january-2023/

‘Market research and prototyping exercise confirm feasibility of technical solutions and user interfaces for a digital euro’, 26 May 2023 https://www.ecb.europa.eu/paym/intro/ news/html/ecb.mipnews230526.en.html

‘Issuance of Discussion Paper on Central Bank Digital Currency: Comments from the Public’, Central Bank of Kenya, 2 June 2023 https://www.centralbank.go.ke/uploads/ press_releases/103592893_Press%20 Release%20-%20Issuance%20of%20 Discussion%20Paper%20on%20 Central%20Bank%20Digital%20 Currency%20-%20Comments%20 from%20the%20Public.pdf

SUSTAINABILITY CASE STUDY: Alignment of the Royal Australian Mint and the Children’s Book Council of Australia to promote literacy and Australian stories

INTRODUCTION

In this case study, we explore the successful alignment between two important Australian institutions, the Royal Australian Mint (RAM) and the Children’s Book Council of Australia (CBCA). The collaboration between these organisations has resulted in a unique program that promotes literacy, Australian stories, and engages young Australians in a meaningful way.

BACKGROUND

The CBCA is a not-for-profit, volunteer-run organisation with a mission to engage the community with literature for young Australians. Their dedicated team inspires teachers, librarians, and caregivers to share their enthusiasm and knowledge about children’s stories and creators, fostering a love of language, art and enhancing literacy skills.

The RAM, with a commitment to quality and sustainability, is an industry leader in creating public value in an environment of evolution and change. The CBCA coin program aims to encourage children and adults to rediscover classic Australian stories while promoting the joys and benefits of reading.

OBJECTIVES

This collaborative coin program between RAM and CBCA has the following objectives:

  • Promote reading and literacy among young Australians, highlighting its numerous benefits such as brain exercise, improved concentration, increased vocabulary, and enhanced imagination.
  • Celebrate Australian stories that resonate with generations, fostering a sense of cultural heritage and national pride.
  • Raise awareness of both RAM and CBCA across schools, teachers, and librarians who play a crucial role in shaping young minds.
  • Provide additional value to CBCA by incorporating the coin program announcement as part of their awards announcement during CBCA Book Week.
  • Generate revenue for the CBCA to support their core activities.
  • Generate revenue for the Mint through the use of CBCA branding on coin packaging and marketing, supporting their programs and initiatives.

PROGRAM IMPLEMENTATION

The program may be sustained due to the alignment with the annual CBCA Book Week that takes place in schools across Australia. Each year, a selection of Australian children’s stories is chosen for celebration and commemoration through the creation of special edition coins.

The books selected for the program are those that have stood the test of time, resonating with Australians who have grown up reading them or have passed them down to their children and grandchildren. This connection to cherished stories adds a sentimental and nostalgic value to the coin program.

PROGRAM BENEFITS

The collaboration between RAM and CBCA has yielded significant benefits for both organisations:

  • Increased awareness: the coin program raises awareness of both RAM and CBCA through the CBCA’s network of schools, teachers and librarians who are informed about the program, leading to increased exposure and engagement with the Mint and its coins. Book Week is also shared through the Mint’s network of dealers and coin collectors across Australian.
  • Enhanced CBCA Book Week: the coin program announcement has become an integral part of the CBCA Book Week awards announcement, adding an exciting dimension to the event and further promoting literacy and Australian stories.
  • Financial Support: CBCA received $10,000 per release for the use of their branding on packaging and marketing materials. This funding can be reinvested into their programs, enabling them to continue their valuable work in promoting literature and literacy among young Australians.

CONCLUSION

The alignment between RAM and CBCA serves as an exemplary model of collaboration between two organisations dedicated to promoting Australian stories. Through the coin program, young Australians are encouraged to read, explore their imagination, and connect with the cultural heritage of their country.

Mints across the world can draw inspiration from this case study, showcasing the positive impact that can be achieved by aligning their institutions with literacy-promoting organisations in their respective countries. By investing in such initiatives, Mints can contribute to the educational development of future generations and foster a love for literature and culture.

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