But the march toward cashlessness stalled due to wariness about
invasions of privacy. Scholars and public leaders alike are reluctant to consider the idea
of replacing cash with an electronic currency system, particularly one operated by
government, lest they be seen as willing to compromise privacy. These concerns have also
hindered discussion of significant social and economic benefits that could result from
ending the use of cash, including major reductions in taxes, vastly improved public
services, and the total eradication of many of the most serious and violent crimes.
True cashlessness will come about only if a government undertakes the
project since only government can put an end to the production and circulation of cash,
and only government can realistically administer an electronic replacement for cash. The
payment industry (including VISA, MasterCard, and Citibank) cannot replace cash
completely, despite smart cards, cybercash, and other innovations.
Though the public enjoys the conveniences of "plastic," it
still loves money. Virtually everyone carries some currency and coin, and the amount of
cash in circulation continues to rise. The very idea of abolishing cash in favor of a
government-operated electronic currency strikes many citizens as peculiar and
questionable. A typical reaction is, "I use very little cash nowadays anyway, because
I use a credit (or debit) card for most of my purchases. Cash will probably fade away of
its own accord someday." And, "We're getting along fine, so why put everyone to
the bother of learning and adopting some new money system?"
The world is hardly "getting along fine" with cash. Most
crimes are either committed to steal cash or use cash as a method of payment. Drug
trafficking is conducted exclusively in cash. The bulk of tax evasion is hidden in
cash transactions. Cash carried in purses and wallets continues to make everyone a
potential robbery victim. Throughout history, cash, in coin or paper notes, was a
problematic necessity for which there was no practical alternative. With the advent of
EFT, however, the relative detriments of cash can be targeted, if not eliminated.
Ending the use of tangible cash would greatly boost the quality of life
by reducing crime. The most direct and noticeable effect of ending tangible cash would be
the disappearance of bank robberies, cash-register robberies, and muggings. Other illicit
activities reliant on cash, such as receiving stolen property and bribery, would nosedive
as well, because with anonymous cash gone, any alternative payment medium would leave a
trail that would serve to detect and prove, and hence deter, those criminal acts.
Crippling underground illicit activities would also generate billions of
dollars in previously unreported tax revenues. Ending cash would also save industry the
billions of dollars required to handle currency and coin. Overall, the social and economic
potential in converting tangible cash to an electronic system is staggering.
Reducing Cash-Related Crime
I have proposed that government replace currency and coin with an electronic equivalent
that I label FEDEC, or federal electronic currency, which would emulate tangible cash as
closely as possible except for its physical form as paper or coinage. The national
government would operate the system and guarantee the new electronic money. FEDEC would
not replace credit card and other private-sector EFT systems and networks, nor would it
replace bank-checking systems. It would operate as a separate system in which every person
and legal entity would have an account. Funds would transfer within the system only from
one account to another, and there would be no direct interchange with private-sector
payment systems.
...
Each year, nearly 3 million Americans are victims of crimes in which
criminals target cash, according to extrapolated statistics from the U.S. Bureau of
Justice Statistics. All over the world, cab drivers, convenience-store clerks, bank
tellers, and others who deal almost exclusively in cash are accosted daily and often
murdered, simply because they possess currency, and the impact of these crimes resonates
throughout society....
Making cash electronic has the potential of making workplaces and
crime-ridden neighborhoods safer, reducing prison populations, and freeing up emergency
rooms. It could bring down insurance rates, cut public outlays for law enforcement and
courts, and much more. If drug crimes and tax evasion, both of which are conducted almost
exclusively in cash, are included in the calculations, the fiscal relief could run as high
as a trillion or more dollars each year.
...
Abolishing cash would necessarily entail some loss of privacy because
one could no longer transact monetary business without the possibility of recording
payment data and thus having it exposed. But this loss would be limited to data from
illicit acts and would result only from the fact that cash transactions, as a matter of
feasibility, are usually beyond the observance of authorities or others entitled to it.
That should not be regarded as a legitimate loss of privacy.
America loses more valuable resources from the side effects of tangible
currency than it does from wars, terrorism, and even natural disasters. That makes
electronic currency, whether recorded or anonymous, is simply too advantageous a step to
pass up.
About the Author
David R. Warwick is a real-estate developer, investor, and
former attorney. He is author of Ending Cash: The Public Benefits of Federal Electronic
Currency (Quorum Books, 1998) and many articles in various publications.
Excerpted from THE FUTURIST, July-August 2004. Click to order.)
s far back as 1888, novelist Edward Bellamy envisioned a cashless society by
2000, but it still hasn't come. A major step toward cashlessness came with the advent of
electronic funds transfer (EFT) technology, which ushered in the era of credit-card
transactions in the mid-twentieth century. As the use of "plastic"--which
subsequently included debit cards--gained momentum, the world seemed bound for complete
cashlessness as the end of the century neared.