Just think, you can stash maybe 10,000 euros in a single cigarette box using 500's. If you remove that note and fall back to say the 100euro note then you now need 5x the space or can only conceal a fifth of the value in the same space. The concealment & movement of money now needs to be scaled up to move the same quantity of money, which in turn raises the risk of someone being discovered. Getting stopped in the street you could hide a few 500's in a wallet which would easily be missed. In lower denominations you're now talking about wads of notes that are more noticeable.
The reason computer chips are so small is computers don't eat much.