I’m a big fan of Bitcoin and have a soft spot for Monero. I like the idea of non-interventionist governments, nonintrusive tech companies (if you find one in the wild, let me know) and keeping personal information from parties that don’t actually need it to function.
My worst nightmare somehow manages to cram all of the things I don’t like into one massive parcel and have it distributed by entrepreneurs and governments as the latest fintech innovation: the cashless society.
In principle, I think fiat currencies need to go. On a long enough timescale, they will: the average lifespan for such a system is 27 years. The very notion of money imposed by nation states is flawed, anyways.
In day-to-day life, however, I think cash (as in, the colourful paper you keep in your pocket) is wonderful. Within its (admittedly large) closed-loop system, you can transact privately in a peer-to-peer fashion with transaction finality. I sincerely wish I could say Bitcoin outperformed cash in this regard, but it doesn’t, and it won’t for awhile. There are no brick-and-mortar stores in my immediate vicinity that accept it.
Don’t burn me at the stake just yet. I pay with cryptocurrency whenever I can, but I think the most prudent way to look at Bitcoin, for now, is as experimental software (that said, I believe it’s the only offering with a shot at replacing fiat currencies eventually). I wouldn’t expect any sort of proper price stabilisation or hyperbitcoinisation event to take place for the next several years, and as such I feel it would be foolish to keep anything more than disposable income in Bitcoin.
In the interim, cash is my go-to medium of exchange and short-term HODL. I use bank transfers or card payments only when strictly necessary.
DIGITISE ALL CASH
This may sound rich coming from someone with so much enthusiasm for an immutable ledger of transactions, but leaving a digital footprint of every transaction you make just sounds like an awful idea. With Bitcoin, at least you’re afforded some privacy (provided you avoid pitfalls like address reuse or tying an address to your real identity).
What would a cashless society look like? On the surface, probably not that different to what we have today. You’d maybe notice the lack of ATMs or coin slots in vending machines: everyone would be paying with cards or NFC-enabled smartphones. Dig a bit deeper, and it all still looks similar – a myriad of banks and payment processors form the backbone of digital transactions. Except this time, you can’t opt out.
Trends certainly seem to indicate that many are okay with the migration towards cashlessness – it was reported last year that 500 ATMs around the UK were shutting down on a monthly basis (the UK had already been steadily losing interest in cash payments). That said, whilst Sweden has indubitably led the cashless charge for years, people are having second thoughts about it.
Why it’s the Worst Idea in the History of Worst Ideas
I was in a café when the Visa network went down over the summer. I can assure you that the caffeine-deprived clientele waiting in a long line weren’t too pleased when they realised they didn’t have cash on hand to get their fix.
I’m trying to think of a single defensible reason for why you’d want to scrap the cash option altogether. Yes, cashless payments may be convenient (and stop a mugging from separating you from, what, $30?), but they’re not equivalent to cash in the digital space. Far from it.
Let’s overlook the fact that a mugging pales in comparison to the financial damage someone could do with your compromised credentials. Or that all it takes is a bug or malfunction with the network to halt your activities. Or even that lack of cash acceptance would fence out the poor and the elderly from financial inclusion. Let’s instead focus on the privacy violations that transpire when you introduce third parties into your every transaction.
You could make the case for cash being permissionless — once it’s in your possession, you can do whatever you want with it, whether you’re buying child soldiers or donating to a church. What happens is between you and your counterparty.
In the case of a card payment, on the other hand, when you initiate the payment to your counterparty, data is sent to the processor, which relays it to the card association’s network, which passes it on to the acquiring and issuing banks. If everything looks good, the processor will let you know and the banks will settle up.
Astute readers will have picked up that the latter scenario leaves room for censorship of financial transactions and mass surveillance. Without cash (in a pre-cryptocurrency world), every payment or transfer you make essentially requires you to ask your bank to allow you to do so. Good luck buying cryptocurrency (or indeed, anything) if they aren’t onboard with it.
Short Cashless, Long Fiatless
The only acceptable iteration of a ‘cashless society’ is one that has evolved beyond fiat, both digital and physical (but even in that case, I suppose you’d have real ‘digital cash’ in the form of cryptocurrencies, only not issued by a government). Before we get there, however, we need optimisations to stateless virtual currencies (and the infrastructure making them accessible) to ensure that they can be used by everyone.
The widespread acceptance of Bitcoin won’t happen overnight. There’s a long way to go. I think we’re relatively safe with strong currencies for the time being, even if they’re on a death spiral in the long run.
But please, stop propagating the idea that they can be made better by stripping individuals of their freedom to transact independently.
Cover art by the author.