The problems of a cashless society are known to those who want to maintain greater financial independence and freedom, and anonymity with their purchases. But governments and central banks also have their own motives for stopping the advancement of a completely cashless society, despite the desire and push from other private banks.
Source
The Bank of Canada is sounding the alarm of the problem with a cashless society in a paper entitled "Is a Cashless Society Problematic?". Other countries has issued their own warning, and some have established laws to protect the existence of cash in society.
The European Central Bank has warned os chaos in a cashless society in August, citing cybersecurity concerns and the loss of cash posing a risk to the financial system itself. Complete dependence on electronic banking could cripple financial systems if there are power outages or cyber attacks. As such, the ECB has backed off on the war on cash. The People’s Bank of China has stated that all non-e-commerce business must continue to accept cash despite the advancing hype of a cashless society in China. The Washington D.C. city council also introduced a bill to ban businesses from rejecting cash payments or charing more for cash paying customers.
The Bank of Canada is joining the dismay of a cashless society as it analyses the downfalls of killing cash, regardless of individual actions to stop using cash among most of the population. If the lack of cash use would prompt the central bank to stop printing physical money to cut costs, there are negative consequences to be aware of.
Even though the BoC would not be the ones to force people to go cashless, voluntary effort to abandon cash in our modern technology age of convenient digital transactions, small segments of people would be blacked out of much economic activity. Some people prefer the anonymous nature of cash transactions, or they like how cash imposes "spending constraints". This minority of people would be worse off as the world around them would shrink in terms of where they could use their money.
With the death of cash, the private banks and credit card companies would have an even greater monopoly control over the payment systems of a nation. Canada has one debit system called Interac, and 3 credit card companies: Mastercard, Visa and American Express.
In some remote areas or for those who don't have a bank account, cutting off cash would be cutting off their ability (or right) to be able to engage in economic exchanges. Those without a bank account may only represent 2% of Canadians, but they should still have the right to interact in the economy and not be penalized for staying with cash. In other countries, the segment of the population that relies on cash is even greater. Cutting people off from participating in the economy is not just, right or fair.
Apart from the economic exclusion, there are elevated security risks to a cashless society, as the ECB has pointed out. Cash is immune "to electronic network failures, cyber attacks and power outages". With a cashless society, everything hinges on the dependence of an operational electrical infrastructure and electronic retail payments networks. Electrical grids do go down, and credit card companies are affected, as was seen in Europe this summer when people has issues paying for gas, groceries or restaurant bills.
Let's not forget how valuable cash is in an economic crisis. Iceland and Greece were hit hard in the previous global financial crisis of 2008-2009. There were runs on the bank, and people were unable to take money out of banks. There were rendered impotent in their purchasing abilities. But those who had cash, were able to buy what they needed to live, or whatever else their cash could afford them. As major banks collapse, cash use more than doubled in Iceland.
For central banks, two main issues arise for themselves:
Loss of Seigniorage.
Central banks earn profit by issuing currency from "difference between the face value of coins and notes and their production costs." Wiping out cash would mean wiping out some of their profits, and contract their balance sheet with a loss of 3/4 of the BoC's liabilities.Reduced Interventionary Powers.
Banks provide liquidity in a financial crisis by selling off their holding of government securities. They then purchase other liquid assets with that money. A contraction in the BoC's balance sheet would hurt their ability to do this.
Solutions to the above, proposed in the paper, are for the BoC to charge more for it's services to the financial industry. Expanding the balance sheet "by buying government bills and bonds with reserves", like banks do when they engage int eh flawed "quantitative easing " to try to prop up faltering economies, as has been done in recent years sine the last crash on 2009. Other measure can be to prevent the erosion of cash by imposing measures that ensure the availability of cash; regulate payment networks to prevent anti-competitive outcomes; and a central bank "digital currency" to compete with private payment networks.
The authors of the reports rightly have misgivings about the danger and threat of a cashless society. Cash is a sage store of value in an economic crisis, power outage, network failures or cyber attack. It's also a safeguard against private monopolies that exercise control over the use of financial payment systems.
Anonymity and freedom to transact is threatened in a cashless society, which can implement a social credit system with consequences for violations like China has that restricts digital transaction use. This includes preventing people from using public transportation, buying or renting a car, or sending their child to a school.
References:
- Is a Cashless Society Problematic?
- Backlash Against War on Cash Reaches the Bank of Canada
- Central bankers warn of chaos in a cashless society
- As China goes increasingly cashless, PBOC says cash payment is still alive
- Why going cashless is discriminatory – and what's being done to stop it
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Thanks for well written post, good analysis. It resonates with my own thoughts on Cashless Society, the subject I've been following for past several years. (have also posted couple of times about it)
However I am more inclined to think that Crypto is more like an instrument which has been devised and now used as a tool or medium in this Transitional Period towards Cashless, both to prepare general public for that future and ... to demolish the existing Financial System of Fiat.
Some sort of a "wedge" used to knock out another "wedge" (as in wood splitting) - after that both such wedges are thrown away.
Perhaps it is actually a freedom bane disguised as boon.
I was weary of crypto for a while as well, simply because it was digital and I saw it as a push towards crypto, whether intentional or not that the centralized forces would take advantage of and co-opt. But at least it's better than the centralized money, so I warmed up to it ;) It can still be used as a segway into channeling the masses into a new financial order that's still ruled by the elite through... those with money can always buy up the power in the crypto world.
I've started to be weary and doubtful since I've watched back in 2011 the documentary "Zeitgeist: Moving Forward" (that's already Part 3):
the ending was like people all over the world come out on the streets, heading towards the Banks and throw in front of banks piles and hills of CASH Fiat money!
(the whole film is here, fast forward to 2:30:05)
somehow I've got the gut feeling of a suspicion: isn't part of the typical scheme "Problem-Reaction-Solution"? kind of cause emotional response from the vast masses of people, then propose them "Solution" (here Crypto) and make them believe that it is something which came out naturally as an organic idea from the masses (or from "Resistance") and what masses gladly embrace themselves (not something which was imposed upon them LOL)
in such a way prepare them for the total Paradigm Shift as well as Tech Reset, using transition period to arrange all the necessary tech, legal / legislature, security and other issues.
and then, after mass population get used to that "Solution" ... they would feel easier to accept (or have no other choice) the New Financial System, which would be totally Cashless Society with all those "side effects" accompanying it, as any medicine does usually...
I still worry they pretend not to want something to get the masses demanding it (similar to my Trump theory). They have already made it to where one should be wary of having any sizable amount of cash on them, especially when traveling.
https://www.forbes.com/sites/instituteforjustice/2014/03/12/cops-use-traffic-stops-to-seize-millions-from-drivers-never-charged-with-a-crime/#4456a833f54b
The I10 corridor is famous for this. Then all the regulations to force permits for anything to do with cash (even yard sales and kool aid stands). With a cashless digital money they would have their records to dip their hands into whenever they want. I would not be surprised if their final solution will be to have two or more layers to this, one for the common person and another that is hidden under the pretense of national security. They love using that one to hide their corrupt operations.
Yeah, pigs are scum who rob "legally" and people have to fight even harder in court to get it back because of their undue "authority". The yard sales and lemonade stands are municipal I think, all a way to get their cut of sales and not let anything be a free exchange...
Cashless has its merits but it also certainly has its restrictions as well. I am not entirely worried about the banking system going down; it can certainly get hacked but these banks are now so big that they do whatever they can to ensure their continuity. I am worried however at the implications of using exclusively cash in a data driven world. They would love if they could track every single transaction a person makes. I use mostly credit cards on purchases but there are still some transactions I do with exclusively cash; if I go to a small business and am only spending a couple dollars I won't put it on a card, I will give them cash because I know it helps them more. If I go to a large chain like CVS or anything of the sort I would charge .05 cents if I could because those types of businesses are decimating the small business sector.
On the other hand you certainly have crypto and the financial revolution associated with that. I could do all kinds of transactions anywhere in the world with some crypto exchanging so that's a great benefit.
I use mostly cash, and only use a credit card to order things online. Cash makes me more anonymous and less traceable or targeted with data. Crypto is more acceptable at least as a digital transaction medium, at least for not being centralized by government control. I still try to be as traceless as possible ;)
Gotta buy gold, silver and crypto, just in case. :D
Yup, those are good to have too ;)
The banks will fall. Its just a matter of time. For now I invested a bit of free money in crypto and want to buy gold but its so expensive.
Yeah, gold and silver is low now compared to a few years ago. If the economy tanks, gold and silver will go up ;)
First crypto ATM opened at Bangalore ( India ) two days before,,,
Sweet!
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Ay amigo, cómo se nota que no vives en Venezuela. Aquí es un calvario conseguir el dichoso efectivo, aparte el internet falla constantemente y tenemos que ingeniar las mil y unas alternativas para poder comprar y vender.
language is my out of understand , thanks for your convenience .
Als je uitgeknepen wordt merk je dat je niet in Venezuela woont?
Así parece.
No hablas espaniol ;)