Allister Heath
Shops that refuse cash? Councils that require maddening parking apps? Tradesmen who demand bank transfers? I’m part of the problem, dear reader. The virtual penny finally dropped when I flew to the Middle East recently without first bothering to visit a bureau de change, or even to withdraw local currency from an ATM. Every shop, taxi and restaurant accepted contactless payments; there was no need to fumble through my wallet trying to decipher unfamiliar notes. My smartphone’s mobile payment service was sufficient, a physical credit card largely unnecessary.
Next time, I will also make sure to take foreign currency. The global war on cash made my life easier on this occasion, but far from paving the way towards the liberating, borderless techno-utopia portrayed by a naive, self-interested alliance of Silicon Valley and Wall Street types, it is fast turning into the stuff of nightmares. A cashless society is discriminatory, facilitates crime and hands dangerous powers to busybody officials, technocrats and woke pseudo-capitalists. Rishi Sunak is cracking down on fraud, launching a new squad with 500 prosecutors, but this will achieve little unless the Government finally grasps the need to protect cash from extinction.
A cashless economy compels everyone to carry a smartphone all the time, and to have access to at least one payment card. It requires the use of multiple apps, and substantial levels of technological literacy. This discriminates against the elderly, and anybody who finds technology difficult. It is a disaster for those on the margins of society, without a bank account or who lack a good credit score. Many older voters are incensed at the way their choices have been curtailed. The hit is often two-fold. Take the compulsory shift towards electric cars: it is controversial in and of itself, and of course charge points, unlike petrol stations, don’t accept cash. One of the great selling points of the cashless world was that it would reduce robberies and cut tax evasion. It has achieved the latter, as evidenced by a surprisingly large rise in the tax to GDP ratio, but it has also triggered an epidemic of fraud, with one in 15 people victimised annually by scams such as phishing or dodgy emails.
Many of us now log into bank accounts by showing our faces, presenting our fingerprints or through voice recognition. But impersonation is getting easier: artificial intelligence (AI) can clone our appearance and produce deepfakes – videos that look and sound exactly like us – to fool automated, or even human, identification protocols. Digitisation can be greatly fragilising. Imagine the power of a hacker, turbocharged by AI, sponsored by a crime syndicate, a hostile state or terrorist organisation who was able to delete bank account records, rub out transactions or plant incriminating, fake records of payments? Our society is a mere step away from chaos. Brett Scott, author of Cloudmoney: Cash, Cards, Crypto and the War for our Wallets, defines the cashless society as “a euphemism for the ‘ask-your-banks-for-permission-to-pay society'”. Cash permits decentralised, private transactions between parties; electronic money requires intermediaries, including credit card companies and banks, and navigating their bureaucracy. Unlike cash transactions, electronic transactions can be overridden centrally.
They can be declined because of glitches or because of malign interference. What if a phone runs out of battery or is stolen, or the payment infrastructure crashes? More perniciously, what if politicians decide to flex their newfound muscles? In one of the most despicable power grabs of the pandemic, Justin Trudeau, the execrable Canadian prime minister, froze the bank accounts of people protesting against a law stipulating that all truckers must be vaccinated to cross the US-Canada border. There also appears to be a trend across English-speaking countries for financial institutions or tech companies to cut off or refuse to trade with those with unfashionable opinions. This is an abominable abuse of power, and a threat that will only grow as cash is phased out. Imagine the next pandemic in a cashless world: some politicians might consider enforcing a centralised ban on “non-essential” transactions to impose a perfect lockdown. This is why financial privacy matters, and why the authorities mustn’t be allowed to monitor every single transaction everybody makes in real time and to track every citizen. It is why cryptocurrencies have boomed, even if for now they remain catastrophically volatile. As Ron DeSantis, the Governor of Florida who understands all of this, argued in my interview with him last week, abolishing cash would “empower unaccountable elites”: “Covid should have taught us, you give these people an inch, they are going to take a mile,” he said.
Keynesian-style central bankers have long disliked cash because they want the ability to enforce negative interest rates during deflationary periods – to get banks to charge depositors for the privilege of looking after their savings. This would encourage people to start spending, kick-starting demand. Negative rates can only “work” if all money is electronic: otherwise people empty their accounts and stick notes and coins under their mattress to avoid being hammered. In practice, further empowering central bankers would guarantee even more inflation. So what should be done? Businesses must continue to give customers the choice to pay in cash. The Government must stop discouraging it. The Bank of England should be blocked from pursuing its Britcoin, and other monetary authorities prevented from launching their central bank digital currencies. The private sector should be allowed to develop and use crypto-currencies, but not the state. Britain should learn from Florida, which has banned the use of “social credit scores” in banking and lending. Nobody should be allowed to use the payment system to discriminate on the basis of political views, religion or other legal beliefs. Above all, we urgently need a dose of techno-realism. This certainly isn’t a plea to reverse progress, or to ban digital payments, or any such nonsense, merely a reminder that physical notes and coins serve a hugely useful social purpose. They are not just a means of payment or store of value. Those who want to phase cash out may not realise it, but they are playing with fire.
The Telegraph
