The Price of Control: ??Cashless Society ??A Look at Surveillance, Capital control, & Regulation/Censorship

Where Are We Today? (2024)

Today, we've come a long way from the first credit cards introduced in the 1950s. With a simple swipe of plastic, we can buy whatever we want, whenever we want, without any hassle. Little did we know that our reliance on credit would have painful aftereffects—like raising the overall cost of goods and the complete loss of privacy and anonymity for all electronic or digital transactions.

The Price of Control:

??The Rise of a Cashless Society

??A Look at Surveillance, Capital control, & Regulation/Censorship

The Rise of a Cashless Society

When the first credit card was introduced in the 1950s, people rejoiced at the thought of never having to carry around actual cash again. No more fumbling for loose change or awkward check-writing moments at the checkout counter. All those pesky intermediaries can now take their cut without you even realizing it, just like a toll on a network. Ah, the convenience of modern finance!

But with the rise of digital currencies like CBDCs, it’s like we’ve gone from paying a fee for using the network to having to ask for permission. Worse, now we expect to be searched, scanned, and scrutinized by the government every time we pass through. Control and surveillance have taken the place of convenience. And just like the fee from the network, these intrusions into our financial lives come with a cost, whether it’s monetary, a violation of privacy, or the loss of autonomy.

As more of our daily transactions move online, the use of cash declines. Governments and financial institutions around the world are promoting the use of electronic payments and cracking down on the use of physical money. This trend has sparked a debate about the future of cash and the potential consequences of a cashless society. The question is, are we willing to pay the price for the convenience of modern finance, or will we seek alternative options that prioritize our freedom and privacy?

The war on cash refers to the various efforts to reduce the use of physical money, remove high-denomination bills, and promote the use of electronic payments.

Proponents of the war on cash argue that it will make transactions faster, more convenient, and more secure

Governments and central banks are advocating for the elimination of cash to make it easier to track all types of transactions, including those made by criminals. Criminals and terrorists benefit from the privacy and ease of illegal transactions facilitated by large denominations of banknotes. However, citizens are concerned about the potential repercussions on the economy and social liberties if physical cash is coercively eliminated. The push towards a cashless society is supported by advancements in technology such as online banking, encryption, smartphones, and payment technologies.

By 2015, there were 426 billion cashless transactions worldwide, a 50% increase from the five years prior. Lawmakers argue that removing high denominations of bills from circulation would hinder illegal activities and enhance efficiency in transactions. Cashless transactions are faster, more efficient, and incur fewer costs for banks.

Central banks could also exercise greater control over interest rates to manage inflation, including implementing Zero Interest Rate Policy (ZIRP) and Negative Interest Rate Policy (NIRP). However, the war on cash may have unintended consequences. Cashless transactions would involve intermediaries, increasing government access to personal transactions and records. Certain types of transactions could be restricted or frozen by governments, potentially driving people towards decentralized cryptocurrency alternatives. A cashless society would limit individual freedom to store wealth outside of the system, making savers vulnerable to bank bail-in scenarios and extreme monetary events.

The rapid increase in digital transactions and government stimulus programs highlighted the potential vulnerabilities and privacy concerns associated with a cashless society. As the U.S. increasingly adopts digital payment systems, concerns about privacy and security have come to the forefront. Digital transactions leave a traceable record, making it easier for both the government and private companies to monitor and analyze individual spending habits. This level of surveillance can lead to a loss of personal autonomy and privacy, as every financial transaction becomes potentially subject to scrutiny. The convenience of digital payments comes at the cost of increased exposure to data breaches and cyber-attacks, which can compromise sensitive financial information and personal identities.

As governments and central banks continue to promote the transition to a cashless society, it's essential to consider the potential trade-offs and unintended consequences for individuals and society as a whole.

Trade-offs:

??A Look at Surveillance, Capital control, & Regulation/Censorship

1??Surveillance: Surveillance is a tricky business. On the one hand, it helps catch people doing bad things like money laundering. But the more fraud that happens, the more surveillance is needed, which can lead to invasions of privacy through technology. Private companies may also collect and trade your personal information for their own benefit, and the risks of this surveillance can include scams, harassment, extortion, identity theft, and even tracking your card purchases. Plus, with the rise of AI and machine learning, it’s becoming even easier for governments and companies to invade our privacy. Moreover, it’s often the people who are already disadvantaged or underprivileged who are hit the hardest.

2??Capital control: When spending gets out of control, governments may impose price controls to try and fix the problem. But sometimes these controls make things worse. . Consider the impact of the Federal Reserve's monetary policies on financial accessibility in the United States. During the COVID-19 pandemic, the Federal Reserve implemented unprecedented measures to stabilize the economy, including lowering interest rates to near zero and purchasing large amounts of government and corporate bonds. While these actions were intended to support the economy, they also had unintended consequences. For instance, small businesses and individuals faced challenges in accessing loans and credit, as banks tightened lending standards due to economic uncertainty.

3??Financial Regulations and Censorship: Financial regulations and censorship can be financially and emotionally taxing realities for societies and their citizens. They manifest in various ways, such as capital controls that limit how much money individuals can transfer or withdraw, de-banking practices where financial institutions terminate accounts for those in high-risk or controversial industries, and underbanking practices that underserved individuals and redlined communities. Limiting their access to essential financial services. "Redlined communities" refers to neighborhoods marked as high-risk for mortgage lending, often based on racial or socioeconomic factors. This practice historically denied residents access to loans and insurance, leading to disinvestment and economic decline. As a result, these communities often struggle with limited access to banking services, impacting their financial opportunities and overall economic health.

??For example, following Operation Choke Point, a 2013 initiative by the U.S. Department of Justice, many banks were pressured to sever ties with businesses in certain high-risk sectors to combat fraud and money laundering. Although the operation officially ended in 2017, its impact is still felt, as banks continue to exercise caution and may deny services to legitimate businesses to avoid regulatory scrutiny.

??These practices raise significant concerns about financial censorship and the overreach of regulatory measures. Individuals and businesses affected by de-banking can find themselves unable to access essential financial services, which can cripple their operations and limit their economic opportunities. The lack of transparency in the decision-making process of financial institutions further exacerbates these issues, leaving customers with little recourse or explanation for the termination of their accounts.

??In the U.S., as of 2021, approximately 4.5% of households (about 5.9 million households) were unbanked, meaning no one in the household had a checking or savings account at a bank or credit union. Additionally, around 14.1% of households (about 18.7 million households) were underbanked, having a bank account but also using alternative financial services outside of the banking system, such as payday loans, check cashing services, money orders, or pawn shops. These populations face significant barriers to accessing traditional financial services, limiting their ability to save, borrow, and invest, and thereby exacerbating economic inequalities.

Conclusion

Overall, the move towards a cashless society and the increasing prevalence of de-banking/underbanking highlight the delicate balance between maintaining financial security and protecting individual freedoms. As digital transactions become the norm, it is crucial to address these vulnerabilities and ensure that financial regulation does not infringe upon privacy and the right to participate in the economy.