The Crackdown On Cash

By May 29, 2015Bitcoin Business
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Forty-four years into Richard Nixon’s fiat-money experiment, there’s little evidence the financial system is more stable than it was under the gold standard. In 1971, Nixon suspended the convertibility of USD to gold partially in order to improve the country’s balance of payments, which hasn’t quite worked out as planned. Some policymakers in Europe are ready to double-down on the concept of fiat currency by banning cash altogether.

Earlier this month, the Danish government proposed getting rid of the obligation for retailers to accept payment in cash. Advocates believe going cashless would save shops money on security and time on managing change from the register. Critics, on the other hand, argue that a cashless society would see a massive uptick in fraud and loss of independence. German central banker Carl-Ludwig Thiele criticized the Danish government’s proposal, saying that “abolishing cash would hurt consumer sovereignty – the free choice of citizens about their payment instruments,” and cited Russian novelist Fyodor Dostoyevsky’s famous line: “Money is coined liberty.” Obviously, since Dostoyevsky’s day there have been major advances in digital payments, but his point is still valid.


The “War on Cash” isn’t limited to Scandinavia. Switzerland, once known as a safe haven for currency, has proposed banning cash payments in excess of 100,000 CHF. In North Carolina, a small business owner had over $100k seized after the FBI noticed he made two deposits totaling $11,400 within a 24-hour period. Officials say he had a history of consistent cash deposits of less than $10,000, which is illegal. While that story has more to do with the absurdity of “civil asset forfeiture,” it’s another example of the crackdown on cash.

What are the implications of this “War on Cash” spreading throughout the financial system? For one thing it should ultimately benefit so-called SWAG assets (Silver, Wine, Art, and Gold) that have consistently maintained their value over time without a counterparty. The long-term viability of cryptocurrencies like Bitcoin would also increase.

Ninety percent of existing currency only exists electronically to begin with, but resides within the banking system. Bitcoin, and other digital currencies like Ripple, do not, which is a major advantage for some. In the current dollar-based monetary system, we entrust banks and other fee-charging intermediaries to act as gatekeepers to nearly every transaction. A cashless society would give those gatekeepers even more power. That might be palatable in Denmark, but it’s unclear if the rewards would be worth the risk.

Earlier this month, the Danish government proposed […]

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