Cash is king

March 20, 2019

A random newsflash I stumbled upon yesterday: "The majority (54%) of consumers in Germany forecast cash to become obsolete in a few years and they prefer contactless.". Form personal experience I can confirm that more and more people are paying by card in the Netherlands as well. In fact, increasingly shops stop accepting cash. This is a problem, from a privacy and autonomy perspective.

Cash is anonymous. My bank cannot see what I bought for my money. The merchant cannot tell who I am simply by looking at the money I give him.

Privacy in payment is important. Especially now that the new Payment Service Directive (PSD2) has come into force, which enables third party financial service providers (think Google, Facebook, your mortgage company) to access all your financial transactions (with your permission, that is). Several years ago banks themselves already proved to be keen to use that treasure trove of data for all kinds of marketing purposes…

Cash is also permissionless. My bank cannot stop me from spending my money. Simply because it is not involved in a cash transaction. (Unfortunately, and surprisingly, in the Netherlands companies and shops can refuse to accept cash for payment.)

Autonomy in payment is important too. Perhaps even more important than privacy (link in dutch). Without cash, we no longer own the ultimate stick to keep the banks in check: the threat of withdrawing all are money from the banks. If banks or credit card companies mediate all transactions, they may refuse to transfer money to certain account holders (either on their own accord, or because they are forced by the authorities). This has happened in the past to people trying to donate to WikiLeaks. Credit card companies are known to have blocked the purchase of cryptocurrencies in the past. People travelling abroad may have had the experience that their cards are suddenly blocked.

We see financial censorship is a real danger (and the Electronic Frontier Foundation keeps tracks of this). And unfortunately, there is as of yet no digital alternative to cash.

And no, Bitcoin is not the answer. Bitcoin is neither anonymous nor permissionless. That is to say: Bitcoin is only permissionless in that anybody can join the Bitcoin network. There is no guarantee that your transactions will be processed in a timely fashion. This is up to the miners to decide. If there is a large number of pending transactions, transactions offering the largest transaction fee will be processed first.

Until a truly anonymous and permissionless digital payment scheme has been developed, cash should be king. And I will continue to pay cash whenever and wherever possible. To preserve, like the Ramblers' Association did to protect the right of access to public footpaths in the UK, our right and opportunity to pay freely and anonymously.

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