Switzerland prefers $1,000 bills
Posted by Emvertex
The Swiss national bank (SNB) bucked the trend by issuing a new 1,000 franc note in early march, just as other countries were scrapping large denomination notes. The SNB insists that large-denomination banknotes meet the needs and habits of local people who use cash, and that they are designed to prevent counterfeiting and other illegal activities.
The 1,000 yuan note, which has a purple bottom, has been in circulation since March 13. FRITZ ZURBRUEGG, a deputy governor of the central bank, said it was the central bank’s responsibility to set the denomination of the currency and that large-denomination notes were indeed in line with demand.
“The use of cash has become so popular in Switzerland that it has become a cultural phenomenon,” says Mr Zulbrug. “the $1,000 note is not only a means of payment but also a store of value.”
According to the Swiss national bank, there are 47 million one-thousand-yuan notes in circulation in the country, accounting for about 10.5 percent of the total banknotes and 62 percent of their value. “They’re used a lot when people buy expensive things like cars or go to the post office to pay their bills,” zulbrug said.
Ten years ago, the Swiss central bank responded to the financial tsunami and the European debt crisis by implementing negative interest rate policy. As a result, people began to hoard cash and the circulation of 1,000 yuan notes soared. According to the 2017 SNB survey, about 40 percent of respondents have held at least one thousand Swiss franc in the past two years, especially among the elderly.
Switzerland’s insistence on issuing thousands of Swiss francs runs counter to a global trend of countries racing to eliminate the large banknotes. Since January, as many as 17 central Banks in the 19 countries that use the euro have stopped issuing 500 euro notes because they are often used as money laundering instruments. Two exceptions, Germany and Austria, plan to print no more 500 euros after April 26th.
In fact, 500 used to be known as “bin laden” because of its large denomination and its cash form, making it a prime tool for criminals to finance terrorism and often used for money laundering or tax evasion. For the same reason, Singapore’s central bank recently announced that it would no longer issue 10 million yuan ($7,383) notes.
Easy to encourage tax evasion and crime
Harvard University professor Roger rogoff says Switzerland should phase out the CHF $1,000 notes because they encourage tax evasion and crime. “It doesn’t surprise me that people in Switzerland are all over the place with $1,000 notes, but some of that money may come from tax evasion or criminal activity before it goes into the market,” he said. But the SNB counters that there is no evidence to date that “criminals are more likely to use large-denomination notes”.
Some also suspect that some people withdraw large sums of money from bank accounts at the end of the year to reduce taxes, and that large bills are relatively easy to carry. But the government clarified that it was normal for people to spend more toward the end of the year, and that cash withdrawals, perhaps for Christmas gifts and other purposes, had nothing to do with tax evasion. In fact, the Swiss national bank has added a number of security features to its new $1,000 notes, and will introduce a new, safer $100 note in September to stamp out counterfeiting.
IMAGE / Reuters