Why Portugal's Cash Crisis After the Blackout Changed How Residents Handle Money

The Banco de Portugal (BdP) recorded a net decrease in banknote circulation for 2025, even as metallic coins continued to flow out of the central bank's vaults at an accelerating rate. The shift—revealed in the institution's annual monetary emission report published this month—reflects evolving cash habits among residents and tourists alike, amplified by economic uncertainty and a nationwide blackout that underscored the fragility of digital payment systems.

Why This Matters

• Cash hoarding is rising: Despite record tourism revenues, fewer notes returned to the central bank, suggesting residents are stockpiling physical currency as a financial safety net.

• Coins in demand: Small-denomination coins (1 and 2 cents) accounted for 37% of all coins issued, pointing to persistent micro-transaction needs.

• Blackout wake-up call: The April 28 power failure left ATMs and card terminals useless, driving a spike in cash withdrawals in the days that followed.

• Counterfeiting remains low: Only 8,839 fake banknotes detected nationwide, a fraction of the 382 million verified.

The Numbers Behind the Shift

Last year, the Banco de Portugal issued €6.02 billion in banknotes but received €8.88 billion back, yielding a negative net emission of €2.86 billion. By year's end, Portugal's net banknote position stood at -€31.7 billion, meaning far more euro notes are held outside the country than within its borders—a typical pattern for a tourism-dependent economy within the eurozone.

Yet the volume of notes returning to the central bank declined by 22.6 million units compared to 2024, even as tourist spending hit all-time highs. The BdP attributes this anomaly to the "use of cash as a store of value"—a polite way of saying households are stashing notes in drawers, safes, and under mattresses rather than depositing them in banks.

The €20 note remained the most requested denomination from credit institutions, comprising 49% of all banknotes distributed. The €50 note, meanwhile, held its position as the most widely circulated overall. The infamous €500 note, long associated with illicit finance, continued its slow exit: only 400,000 units returned to the BdP in 2025, totaling €204.7 million.

Coins Keep Rolling Out

While banknotes contracted, metallic currency expanded. The Banco de Portugal dispatched €67 million in coins and received only €35 million back, a net issuance of €32 million. The 1-cent and 2-cent pieces—often criticized as economically inefficient—proved surprisingly popular, together accounting for more than a third of all coin demand.

This persistence of small-change usage suggests that despite the rise of contactless payments and mobile wallets like MB Way (used by 45% of Portuguese account-holders for personal transfers), certain retail environments and consumer habits still depend on physical currency for rounding and tipping.

Why Residents Are Hoarding Cash

Portugal ranks among the European countries with the highest savings intentions for 2025, driven by a post-pandemic, post-inflation mindset that financial analysts describe as "defensive saving." Surveys show that 37% of Portuguese savers prioritize accumulating a buffer for unexpected expenses, while another 36% save toward personal goals.

But unlike previous generations who favored bank deposits or government-backed savings certificates, a segment of the population is reverting to physical cash stockpiles. The reasons are threefold:

Perceived control: Holding banknotes provides a psychological "cushion" against financial volatility, even if inflation erodes real purchasing power over time.

Distrust of digital systems: Memories of the 2022 inflation spike and geopolitical instability have fueled skepticism about the reliability of electronic infrastructure.

Contingency planning: The April 28 blackout—which paralyzed card terminals, ATMs, and online banking across the Iberian Peninsula—demonstrated that digital payments can vanish in an instant.

The BdP itself has advised residents to "maintain a reserve of physical money" in various denominations, sufficient to cover essential and urgent expenses during unforeseen disruptions.

The April 28 Blackout: A Stress Test for Payment Systems

On April 28, 2025, a cascading grid failure—later attributed to a calculation error by Spain's Red Eléctrica—plunged Portugal and much of the Iberian Peninsula into darkness for several hours. The blackout, which struck around 11:30 a.m., knocked out roughly 15% of economic activity that day.

Credit and debit card payments became impossible. ATMs went dark. Even mobile payment apps like MB Way struggled as cellular networks operated at half-speed. In Lisbon's traditional markets, long queues formed as shoppers scrambled to settle accounts with whatever cash they had on hand.

The Banco de Portugal's treasury services continued operating without interruption, supplying banknotes to the banking system throughout the crisis. In the days that followed, both the number and average value of ATM withdrawals surged, a behavioral pattern the central bank interpreted as a renewed appreciation for the "importance of cash in contingency scenarios."

Production, Verification, and Destruction

Portugal's share of eurozone banknote production is coordinated with Austria and Belgium. In 2025, the Valora printing facility manufactured 104 million €10 notes for the BdP's allocation. The central bank also received 17.2 million €5 notes and 103.6 million €20 notes from other eurozone printers.

Over the course of the year, the BdP verified the authenticity and quality of 382 million banknotes and 82 million coins. Credit institutions and cash-in-transit companies processed roughly nine times as many notes and 24 times as many coins as the central bank itself. To ensure compliance with recirculation standards, the BdP conducted 572 inspections of these entities.

Counterfeit detection remained robust: 8,839 fake banknotes and 2,657 counterfeit coins were identified nationwide, representing a minuscule fraction of total circulation. Manually, staff at the central bank assessed and reimbursed 578,000 damaged notes and 190,000 degraded coins, returning €11.3 million to citizens who presented mutilated currency.

The fate of unfit banknotes is both practical and sustainable: 90 metric tons of shredded note fragments were incinerated in 2025, with the energy recovered to generate electricity.

What This Means for Residents

For anyone living in Portugal, the central bank's findings carry several actionable implications:

• Keep a cash cushion: In light of blackout risks and infrastructure vulnerabilities, holding €200–€500 in mixed denominations at home is prudent.

• Don't over-hoard: While physical notes offer contingency insurance, they yield no interest and lose real value to inflation. Balance cash reserves with interest-bearing deposits or inflation-indexed savings certificates.

• Expect continued digitalization: Despite the uptick in cash hoarding, the long-term trend favors digital payments. The European Central Bank's euro digital currency is on track for pilot testing in 2027, with full rollout possible by 2029.

• Know the cash payment limits: As of July 2027, the EU will cap commercial cash transactions at €10,000. Portugal's existing limit is stricter at €3,000, so large purchases will increasingly require traceable payment methods.

Commemorative Coins and the Future of Physical Money

In 2025, Portugal issued two commemorative coins: a €2 piece celebrating "Sustainable Development" (500,000 units) and a €5 collector coin honoring author Camilo Castelo Branco (30,000 units). These limited releases underscore the symbolic and cultural role that physical currency retains, even as its transactional function wanes.

Across Europe, the redesign of euro banknotes is underway. The European Central Bank launched an international design competition in 2025—the first major overhaul since the currency's 2002 debut—with final selections expected by late 2026 and circulation several years thereafter. The new notes will feature enhanced security, sustainability, and representations of Europe's natural and cultural diversity.

Yet the trajectory is clear: cash is becoming a complementary tool rather than the dominant medium. The Banco de Portugal's 2025 report captures this transition in microcosm—a society clinging to the tangible security of banknotes while inexorably embracing the convenience of digital wallets, all under the watchful eye of a central bank preparing for a future where both coexist.