It’s a puzzle. Cash use in Britain has been declining for many years, but demand for banknotes is rising sharply. And no one really knows where the money ends, CNN writes on its website.
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On Friday, a group of British lawmakers said they had “lost” to 50 billion pounds (1.46 trillion crowns) and called on the British Central Bank (Bank of England) to investigate the matter.
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The money “is hidden somewhere, but the central bank does not know where, why or who is hiding it, and it does not seem to be very interested in it,” said Meg Hillier, chairwoman of the lower house finance committee of the British Parliament. “There is a need for the (central bank) to be more interested in where the £ 50 billion ended up,” added the chairwoman of the committee overseeing public finances.
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Britain’s central bank responded immediately to the call. “People are not obliged to tell the central bank why they want to keep money in cash. However, this does not mean that the banknotes are lost somewhere, “said the spokesman, adding that the central bank will continue to satisfy the demand for cash.
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Although the use of digital payment methods has increased, so has the demand for cash in developed countries since the financial crisis, according to a 2018 report by the Bank for International Settlements (BIS). in the bank.
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“We observe that the reserve function of cash is growing, and conversely the function of currency is declining,” Sarah John, head of the monetary section of the British Central Bank, told the parliamentary committee in October. Concerns about the stability of financial institutions also contributed to this trend after 2018.
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Cash covers 30 percent of transactions
By the time coronavirus closure peaked, demand for banknotes and coins fell sharply. Subsequently, however, demand began to grow again, as people began to accumulate even more money at home due to the epidemic.
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Banknotes in circulation in Britain reached a record 4.4 billion in July and totaled £ 76.5 billion (2.23 trillion crowns), according to a September report by the State Audit Office (NAO), which controls public sector finances. In 2000, only 1.5 billion banknotes worth £ 24 billion (700 billion crowns) were in circulation.
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At the same time, however, the volume of cash payments is declining and this trend has intensified during the pandemic. Ten years ago, 60 percent of transactions were paid for in cash, last year it was less than 30 percent.
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The central bank estimates that 20 to 25 per cent of the value of cash is used for payments, and another five per cent keeps the British household in savings.
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“Little is known about what is happening with the remaining 50 billion,” the NAO said in a report. However, according to the office, it is possible that this part of the cash is used for payments and savings abroad, or it is kept by British households in savings that are not registered anywhere, or are used in the gray economy.
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The office recommended that the central bank, in cooperation with other authorities, try to find out why the demand for banknotes is growing and who is holding the £ 50 billion. “This could lead to findings in other areas, such as tax evasion,” the audit authority added.
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The NAO also mentions the risk that declining cash use may lead to “financial exclusion” if businesses stop accepting cash due to rising costs due to declining cash payments. More than a million British adults do not have a bank account, the report said, citing figures released by the Financial Markets Authority (FCA). “There is a connection that makes it easier to pay in cash in poorer areas than in some cities,” John told the committee.
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Five different authorities are currently responsible for the British monetary system. The British government said in October that it was considering transferring all responsibility for the operation of the monetary system to the Financial Markets Authority. She also added that she wanted to guarantee that people could pay cash in the future.
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