The European Central Bank is to phase out the €500 (£400) note, nicknamed the “Bin Laden” because of its association with money-laundering and terror financing – and because while many people know what it looks like, few have ever seen one.
The ECB announced on Wednesday that the fuchsia-coloured bills, the highest denomination of the eurozone’s seven banknotes, would no longer be printed or distributed from 2018, on the grounds that they are too often used to finance crime.
The move, approved by the bank’s governing council meeting in Frankfurt, comes after months of mounting pressure from France – which has been working to clamp down on terrorist financing in the wake of last year’s attacks in Paris – but equally stiff opposition from Germany.
According to ECB statistics, €500 bills account for only 3% of the total number of euro banknotes in circulation, but nearly 30% of the €1tn in use last year. A survey in 2011 found that 56% of EU citizens had never actually used one.
Although there is no specific data to establish that €500 bills are widely used for illicit activities, an EU action plan found last year that the notes were “in high demand among criminal elements … due to their high value and low volume”.
The ECB said: “The issuance of the €500 will be stopped around the end of 2018, when the €100 and €200 banknotes of the Europa series are planned to be introduced. The other denominations – from €5 to €200 – will remain in place.
“In view of the international role of the euro and the widespread trust in its banknotes, the €500 will remain legal tender and can therefore continue to be used as a means of payment and store of value.”
Europol – which points out that the number of €500 notes has multiplied by six since the single currency’s creation, while the number of €10 and €20 notes has remained largely stable – went as far as to say the ECB should scrap them unless it could show there was a legitimate use for them.
With electronic payments increasing and the anonymity conferred by cash causing growing global concern, banks have also been keen to see the end of the €500 note, one of the highest-value banknotes in the world along with the 1,000 Swiss franc (£720) bill.
A former senior executive at Standard Chartered, Peter Sands, called in February for the abolition of both, along with the US$100 (£70) bill and the British £50 note, saying they played “little role in the functioning of the legitimate economy … and a crucial role in the underground economy”.
Opposition to the note’s disappearance has been further fuelled by growing mistrust of the eurozone’s central bank, and arguments that when interest rates are low, with bank deposits not rewarding and financial markets looking uncertain, a €500 note has a legitimate purpose to store value.
Privacy advocates argue that any measure that makes it harder to store money in cash will automatically end up pushing savers into the financial system and thus towards electronic payments, which are recorded on banks’ databases and can be monitored by authorities.