20,000 Shekels... Cash Ceiling or Trust Test?

*International Economic Consultant, Member of the International Digital Transformation Council

Between fiscal discipline and the need for daily liquidity, the Palestinian economy stands at a new crossroads titled "Law to Reduce Cash Usage." The law, which sets a legal ceiling on cash transactions at twenty thousand shekels, opens the door to a wide discussion about the market's readiness, citizen trust in the financial system, and the future relationship between cash and the electronic screen.

The Palestinian Monetary Authority recently proposed a new law entitled "Reducing Cash Usage in Palestine," aimed at limiting direct cash transactions and regulating cash circulation in the local market. The proposal clearly states in Article (4) that "cash payments are prohibited in transactions exceeding (20,000) twenty thousand shekels or the equivalent in currencies in circulation in Palestine." This article encapsulates the philosophy of the law in one sentence: regulating cash through a specified ceiling that cannot be exceeded except by electronic or banking payment methods.

The law has not yet been approved and is still in the public consultation phase, which is an important—and perhaps rare—opportunity to open a national discussion about its philosophy, implementation mechanisms, and economic and social repercussions. The issue concerns not just controlling cash but also the relationship between citizens and the financial system, and between the official economy and the informal economy that relies on daily liquidity.

Today, the Palestinian economy is experiencing a real paradox: a cash surplus in banks and scarcity in the hands of people. Billions of shekels are piled up in banking vaults due to Israeli restrictions on cash transfers, while citizens and merchants face difficulties in withdrawing or trading. This imbalance has created a cash culture based on holding liquidity as a means of psychological security, not as a tool for economic exchange. From here, we cannot view the draft law in isolation from the general trust crisis in the financial system. The employee who keeps cash at home, the merchant who prefers direct payment, and the citizen who fears bank transfers—all reflect a lack of trust more than they reflect a love for cash itself.

However, despite these issues, the clear reformative intent in the law cannot be overlooked. It seeks to enhance transparency, combat tax evasion, and limit money laundering, in addition to bringing more actors into the financial inclusion fold. Nevertheless, the figures are concerning: according to reports from the Monetary Authority, the percentage of adults in Palestine with bank accounts does not exceed 50%, while only about 30% use electronic payment services. This means that nearly half of society is still outside the official financial system, making any legislation that restricts cash premature in light of the existing social and technological infrastructure.

On the other hand, sensitive cash sectors will be the most affected by the implementation of the new law. Besides real estate, construction, gold trade, and automobiles, gas and fuel stations also stand out as one of the most affected sectors due to their almost complete reliance on daily liquidity and direct interaction with the public involving varying but substantial amounts. These sectors represent the arteries of cash movement in the market, and any sudden restriction on cash transactions could lead to confusion in collection and payment processes, requiring more flexible transitional solutions before imposing full enforcement.

Therefore, the best approach to handle the draft law is not through outright rejection or hasty approval, but through gradual adaptation. First, the digital and financial ground should be prepared by expanding the reach of electronic wallets, reducing bank transfer fees, and simplifying non-cash payment procedures. Second, trust between citizens and banks should be strengthened through greater transparency and stronger legal protections for deposits and transactions, so that citizens feel that electronic transfers are as safe as the cash they hold in their hands. Third, the Monetary Authority should consider exempting sensitive sectors such as real estate, construction, gold, cars, and fuel and gas from immediate implementation, as they represent the backbone of daily transactions in the Palestinian market.

Imposing a cash ceiling without preparing the financial infrastructure could lead to adverse outcomes, the most significant of which are the emergence of a gray market trading cash outside the banking system, or people resorting to alternative currencies such as unregistered cash shekels or even dollars and dinars. Here, the reformative idea transforms into a regulatory burden that exacerbates the crisis rather than resolves it. Financial laws—much like international experiences—are not measured by their texts, but by their suitability to market realities and cultural contexts.

The draft law to reduce cash usage represents a step in the right direction towards building a more transparent and disciplined economy, but at its core, it is a test of our readiness for true financial transformation. Legislative efforts, no matter how accurate they are, will not succeed unless they are built on community trust, nor will they be established unless accompanied by realistic implementation tools. Regulating cash is not an end in itself, but a means of managing a modern economy based on efficiency and trust. Therefore, the best approach is not to restrict cash through top-down decisions, but to convince citizens that the modern financial system serves and protects them.

Palestinian experience recommends that any application of the law should be accompanied by an expanded national program to enhance financial inclusion, broaden the reach of electronic wallets, reduce transaction costs, and provide legal guarantees for consumers. It is also advisable to grant sensitive cash sectors—such as real estate, gold, contracting, and fuel and gas stations—a transitional period that allows for gradual implementation instead of a direct shock. This balance between discipline and trust, between reform and gradualism, can transform the bill from a regulatory paper into a tool for changing our financial behavior, paving the way for a more transparent and equitable Palestinian digital economy.

Ultimately, money is not just a number on a screen or a printed paper; it is a mirror of the relationship between the citizen and their state. If this relationship is not built on trust, any cash ceiling will remain theoretical—because the real economy, like human beings, only survives through a balance between security and freedom.