The idea is that you make holding a lot of cash much harder to work with on day to day life. That means the incentives for that are far lower.

It also complicate illegal activities in general.

The idea isn't that your typical criminal will say: "I'm okay with dealing drugs, but the law about 6K NIS is where I draw the line".

The idea is that once they get the money in cash, they have a problem actually using that. So they have to go into addition hurdles.

Basically, it makes illegal activities more expensive.