Bitcoin is a Potent Weapon in the Coming ‘War On Cash’
Why digital cash could save us from a 100% digital money future. What does that mean?
What do you mean by ‘War on Cash?’
It means the phasing-out of physical currency, making all money electronic. You would no longer have the ability to withdraw, spend or hold cash in your hand.
Your money would ideally be kept at an account with your country’s central bank. Banks would still lend money, but would no longer need to hold deposits.
No country is seriously pushing for an outright ban on hard cash just yet, but a number of stalking horses have appeared.
A proposed Danish law would allow businesses to refuse cash payments, while Norwegian academic Trond Andresen in 2013 published a paper saying: “electronic monetary systems offer a big step forward for macroeconomic control, among other things by giving a government new and potent steering tools.”
Hard currency still has plenty of fans, so these are likely the earliest shots in a coming War on Cash.
Why is that a bad thing? Over 90% of money is electronic already.
The best answer would be to ask yourself: “Why would governments or banks want easier control over my money?” Making all money electronic means your ability to use it can be revoked, or made more difficult, at any stage.
We’ve already seen PayPal and credit card companies deny payments to legal businesses and causes they don’t approve of.
Less than 10% of all money is hard cash, but that’s enough to make a difference. If you suspect something is going terribly wrong with your bank, or country’s finances, cash may be your last resort. A bank or ATM run is unpleasant, but it’s still not as bad as suddenly staring at a zero balance on your internet banking screen, and being unable to do anything about it — even if you’d like to, weeks before that bank run.
Those ‘potent steering tools’ Trond Andresen referred to are the ability to encourage or reduce spending, when the government decides the economy requires. How do you encourage spending? Introduce a ‘negative interest rate’ — or in other words, start chipping away at money held in accounts.
Do you actually believe governments can end the boom and bust cycle more effectively with greater control over how you use your money? What exactly would they do with that control? No government, even among the stable ones, has a very good track record at preventing recessions or bubbles over the past century.
The bottom line is, the person who knows how to use your money best is you. Anyone who says otherwise is not acting in your best interest.
Bitcoin is electronic money too — what’s the advantage then?
Bitcoin is digital, but it acts like hard cash. It’s the best of both worlds — all the convenience of electronic money, with all the freedom and privacy of cash.
With bitcoin, you can have 100% control of your money while going digital. No-one can ‘introduce a negative interest rate’ or remove money from a secure wallet, unless you say so.
There are no ‘accounts’, only keys. Keep your keys safe and your money is wherever you want it. Keep them in a safe, on a thumb drive, on a piece of paper. Keep them in your head if you want to. Like cash, your name isn’t attached to any transaction you make, so your privacy is better protected.
No authority can control the source or supply of bitcoin. It springs literally from everywhere, and there are only 21 million of them (each divisible into 100m units). You don’t need to trust anyone to make the right monetary policy, it’s already hardwired in.
Bitcoin is peer-to-peer (P2P) and decentralized. There is no central server to shut down or tamper with.
Best of all, you don’t need to give up ‘regular’ money to use it. If you still feel comfortable using dollars or euro, go ahead. Keep a bitcoin balance in the background, just in case.
Can’t governments control bitcoin as easily as their own money?
This is a genuine concern, and there are definitely moves to regulate bitcoin use as strongly as other currencies — perhaps even stronger.
Governments may (and likely will) discover that they cannot control use of bitcoin even if they want to. Sure, they can try to make it difficult. They could pressure mobile companies to block bitcoin apps, or ISPs to monitor traffic.
They will likely fail. Just as they’ve failed to stop that other popular P2P technology, bittorrent, despite years of pressure to do so.
See what the internet has done for freedom of the media and expression. Remember that just a few decades ago, governments kept a tight rein on who could be an electronic media outlet and what they could do with it. Now anyone can set up a blog, YouTube channel or podcast, and find a wider audience than any local radio or TV station could’ve dreamed of.
Bitcoin can bring that kind of freedom to money and commerce too.
If you think a battle is coming over money, it’s heartening to remember this: technology is always a few steps ahead of those who try to control it. And technology delivers new tools to its users just as quickly as it does for those who rule them.
June 2, 2015