There is something that governments love regardless of the ideology they profess: control. Governments and states was created to arrange the coexistence of people in different regions but seems to evolve to a kind of bureaucratic monstrosity that wants rule every aspect or decision of the people. The last idea for endure this is the proposition of a cashless society.
Of course, governments sweeten the pill saying that a cashless society will be positive because will save cost of banking operations and will prevent money laundering and tax evasion. But if you analyze, all that are benefits for the government itself and commercial Banks.
It’s funny how state institutions worry so much about taxes but then expend more than collect, contributing to the inflation (that only affects regular citizens). A cashless society affect hardly to poor people, that ones that life in an informal economy practically of subsistence. However, we all are affected because we lose financial and personal privacy although the Governments will assure that will be measures to secure these aspects.
In an economy where all transactions are digital everything is traceable and you will never know if you are subject of governmental or corporate espionage. That is with the traditional banking system, but can be worse if the CBDCs come truth.
With CBDCs negative interest can be implement, that way you will lose twice money. First due to inflation and second due a discount every year of the money you have in your account.
Now, in democratic countries you have instruments to fightback if you find some of your right attacked, can be tough but is possible. However, imagine you live in a totalitarian state like me (Cuba), things can be very scary. If right now dissidents or political opposition can be prosecuted and jailed without legal warranties, if they can be expelled from their jobs without reason and banned from any legal economic activity, imagine then in a cashless society. Government can just prevent they can be part of the financial system or be able of send or receive money for buy food products or basic services.
Actually, the Cuban government start a “banking” process due the inflation and shortage of cash, it start limiting the capacity of private business of send or receive payments in cash for an amount higher than 5000 pesos (21 USD dollars approximately) and forcing them to deposit in bank daily all the cash collected. In the actual process of inflation describe in The economic and inflationary situation in Cuba post, this decision that intent to lead to a cashless economy have serious and negatives consequences.
The lack of foreign currency exchange for private companies and natural persons conduce to a black market as only way to get dollars to import products. This market work with cash because people don’t trust in Cuban governmental banks that put limits in the withdraw of money from them. Now that privates business are force to accept digital payments in a fiscal account and to deposit all cash in banks, the possible options are not pleasant. Let’s explore them:
- Business are force to close operations due the impossibility of buy dollars to resupply their stock.
- Private merchants start to underdeclare sales and risk to face legal consequences if they are discovered.
- Begin an informal dollarization process where is needed dollars to buy or pay for services.
Whatever happens the outcomes are evident: a shortage of products (an even larger than the existing) and a rise on the USD value (in just 7 days go from 225 to 235 pesos). None of that helps the Cuban people, but again Cuban government only cares about control and is willing to keep it at any cost.
Yes, this are problems from Cuba, but with a global cashfree economy can happend everywhere.
If you are clever maybe you have been having an idea in your head the whole time you read this post: cryptocurrencies. And yes, coins like Bitcoin, Hive and others focused in privacy can help to avoid this control, but there is a problem. If nobody is willing to accept it as payment method your coin is worthless. For example, in Cuba outside the capital is very few places where you can buy something with crypto, that way no matter if you have crypto you need to exchange to local currency and submit to state scrutiny.
The worst thing about a cashless society is that majority of the population don’t even now the implications about it or directly doesn’t care. Obviously cash is not perfect because can suffer devaluation over time due the money printing, but in a scenario where still exist central banks is the only way to keep privacy inside the FIAT system. Until the day the Bitcoin or crypto standard will be massive accepted cash is necessary and the day it disappear and states introduce effectively the cashless economy will be a very sad one.
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