Cashless society

Tomorrow morning, I’m going to be participating in a discussion about a “less cash” society on WBUR Boston’s NRP News Station. It should air at 8 AM Pacific time, noon Eastern. You can call in and ask questions if you’d like!

The other guest is a Harvard economist who wrote a book proposing society phase out all large bills (over $10) and eventually replace small bills with heavier instruments, like coins. He believes that this will cut down on crime, like international gun and drug trafficking.

I think his proposal is extremely dangerous, especially since digital currencies like Bitcoin don’t yet have anonymity baked in (still looking hopefully at ZCash…). So here are some of the points I’m planning on bringing up:

  • Debit cards and credit cards create a detailed history of our lives, and have far more privacy consequences than cash. The banks generate and hang onto a record of every time you use a payment card, and the cozy relationships between banks and the government mean this data is a honeypot for government agents.
  • It’s not just your purchases that can be exposed by a record of financial transactions. These transactions are time and date stamped, and connected to specific locations. In short, our purchase records create a map of where we are and where we’ve been. It can create a pattern of our typical daily habits, and also demonstrate whenever we deviate from those habits. If you wouldn’t be comfortable with everyone wearing a GPS-enabled bracelet that logged location a few times a day, you shouldn’t be comfortable with everyone being forced to use credit cards.
  • When the banks collect this information on everyone, they can not only piece together a map of your life, they can figure out who was near you, and when.
  • Cash is a fundamental necessity for the unbanked, which include many individuals who are unable to provide the documents that banks require to set up an account such as a government issued ID. Remember, banks claim that under the Patriot Act they cannot provide an account to someone without a physical address. For those who are either sensitive about their address (such as the victim of stalking) or do not have a physical address (such as someone who does not have a home) this means no bank account.
  • Slowly eliminating cash won’t just mean that consumers overwhelmingly use payment cards; merchants will eventually stop accepting cash at all, thinking of it as a small and unnecessary portion of their business. And that’s bad not only because merchants and consumers have to foot the bill for payment card fees but because the small amounts of cash remaining (those hefty <$10 coins) will become obsolete if merchants won’t accept them.
  • Cash is a vital safeguard during emergencies, such as power outages caused by earthquakes or hurricanes.
  • Cash can be a lifeline for domestic violence victims preparing to exit from a dangerous situation. When an abuser has access to one’s digital accounts, available cash can be a lifeline to someone trying to get away and start a new life.
  • We have ample examples of banks abusing the trust of consumers for their own gain. The most recent example is Wells Fargo, where more than 5,000 employees opened over 1,000,000 fake accounts in the names of unwitting consumers. But there are countless examples of banks imposing predatory or unnecessary fees which surprise consumers. For someone living paycheck to paycheck, a $50 fee can be a disaster that means trading off on basic necessities like food or medicine.
  • It’s not just the government that may be interested in bank accounts. Bank accounts can be sought during divorce hearings, child custody battle, and other civil suits — not just to establish how much money someone has but to track where they have been at different moments in time.
  • There are a range of political and social causes that individuals may choose to support, but which they would not want connected to them via a paper trail. The obvious example is the gay rights campaign. When I was in high school in Virginia, I interned at a gay rights organization. This was back in the 90s, when you could lose your job as a teacher in Virginia for being gay. And at the time, many people preferred to make donations in cash. There will always be unpopular social and political causes whose supporters may want the anonymity of cash.
  • Financial institutions have been known to shut down and freeze accounts of individuals who have not been accused of any crime. The obvious example is WikiLeaks, which suffered a huge financial blockade without ever being charged in the United States. But since then, I’ve heard a number of stories of law-abiding websites and individuals who suffered from account freezes and shut downs, including online booksellers, literary archives, and even the Chelsea Manning Support Network (Note: I’m a cofounder of that organization).

In conclusion: those with the fewest resources –especially the unbanked, the poor, the homeless–can suffer dire consequences at the hands of banking institutions, and won’t have a financial cushion to protect themselves. There are many reasons we need financial privacy, for example to protect ourselves from government intrusion and to support unpopular movements. Finally, the banks have a bad track record. From shutting down the accounts of law-abiding citizens to creating fake accounts to countless other questionable practices, there are lots of reasons people may not want to entrust their hard-earned money to the bureaucratic behemoths of JP Morgan Chase and Bank of America.

But I’m sure there are a lot of other points I’m missing. What else? What other issues should I bring up tomorrow? Let me know your thoughts. The show is a full hour so I’ve got lots of time.

UPDATE: I got tons of feedback on Facebook and Twitter that I incorporated into my talking points. Thanks all!