The war on cash in Israel escalates with new bans on cash transactions. Personal transactions over $4,400 and business transactions over $1,760 have been banned. Violaters face still penalties of up to 30% of the transaction’s value.
Why this is alarming: This is exactly what many sound money proponents are worried about. Government is setting limits on the freedom of its citizens to make cash transactions. Under the guise of financial crime enforcement, the Israeli government is ushering in the use of digital payments (possibly in preparation for their central bank’s CBDCs) as a primary means for legally sanctioned transactions.
Our thought bubble: CBDCs allow governments to monitor and track your financial holdings and transactional activities. It spells the end of financial privacy and the beginning of intrusive meddling into citizens’ financial habits and activities.
Starting next week, Israel will prohibit cash transactions above $4,400 and business transactions above $1,760 (or transactions involving the equivalent amount in shekels).
- Beginning August 1, Israel will ban cash for personal transactions over $4,400 and business transactions over $1,760.
- The country will impose fines between 15% and 30% of the relevant transaction value on those who violate the law.
- The law is meant to fight financial crime by promoting the use of digital payments, which are easier to monitor.
Beginning on Monday, citizens of Israel will no longer be able to use cash for transactions larger than $4,400 or $1,760, depending on the entity that they are transacting with.
Reductions Fight Illegal Financial Activity
Israel is tightening its grip on cash.
As of August 1, Israelis will be prohibited from making cash payments above 6,000 shekels ($1,760) in business transactions. According to law firm Herzog Law, this rule applies to donations, loans, and salaries as well as other business-related payments.
Additionally, citizens will be prohibited from making cash payments above 15,000 shekels ($4,400) in personal transactions.
These amounts represent a reduction from transaction limits that Israel previously set in 2019. At that time, business transactions were limited to 11,000 shekels ($3,220) while personal transactions were limited to 50,000 shekels ($14,660).
The law includes exemptions for charities, certain religious institutions, West Bank Palestinians, and family and relatives, but tourists must comply with the law. Additional measures prohibiting Israelis from holding more than 200,000 shekels ($58,660) in cash at home are expected in the future.
Those who violate the law will face significant penalties. Individuals involved in business transactions that violate the limit may receive a fine of between 15% and 30% of the transaction’s value, depending on the size of the transaction.
Individuals who violate the law in personal transactions up to 25,000 shekels will face a fine beginning at 10,000 shekels. If the transaction is larger, violators may face a fine of 15% to 25%, depending on the amount involved.
According to the Israel Tax Authority, the law is meant to reduce the use of cash by Israelis and fight against crime including money laundering, tax evasion, and terrorist financing.
The upcoming rules will promote digital payments, making it easier for authorities in Israel to monitor financial activity.
Other developments could also work toward this end. In June, the Bank of Israel announced that it would test the feasibility of a retail central bank digital currency (CBDC) later this year, with results expected by the end of 2022. A CBDC, like other digital payments, would be easy to trace and monitor.
Israel is just one of several nations that are developing or exploring CBDCs. France’s central bank announced this month that it is hoping to launch a “wholesale” CBDC—a digital currency for use between financial institutions—by 2023.
Elsewhere, in the United States, Federal Reserve Vice Chair Lael Brainard has stated that a CBDC could take “at least five years” to create following Congressional approval.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.