The Wall Street Journal ran an article, The Sinister Side of Cash, arguing that we should phase out all large bills because they're primarily used for crime. Sorry about the paywall, but it's worth reading so you can understand its reasoning. This article is a follow up to my original War on Cash article, focusing specifically on bans of large bills.
My immediate response to the article was to tweet "Bad guys abuse financial privacy, so you shouldn't have any". But this is not really about crime at all, it's about power and control. Fighting crime is always the excuse for a power grab.
You can hold, acquire, and spend cash by yourself. You don't need anyone's help to do it. The goal of those who would restrict cash is to ensure that you cannot engage in economic transactions by yourself. They want to make sure you need someone's help to do it, and they expect to be the ones whose help you will need (or the ones pulling their strings).
Financial institutions are free to pick and choose their customers. I have had my bank accounts closed for no apparent reason. I have a lifetime PayPal ban, most likely because someone stole my identity (though possibly because their name and location just happened to match mine, I don't know). These things cannot be appealed.
There are secret lists of people who cannot open bank accounts. In some cases, it's because some foreign government with no comprehension of due process decided to accuse them of being a terrorist because they opposed that regime.
In a world regulated the way those who seek to ban cash seek to regulate the world, these people will have no way to make major purchases. They'll have no way to live the lives others live.
Imagine a world where the government made it as hard as possible to grow your own food. That would be pretty good for those who owned grocery stores and restaurants, wouldn't it?
And now imagine if the government starts to put greater and greater burdens on those who sell food because, after all, there can't be much crime without food. Of course, grocery stores and restaurants would still be free to pick and choose their customers. If there were only a few near you, and they didn't want to do business with you because they didn't like the business you were in -- that would be it. Without an alternative, you'd be out of business.
Anything regulators didn't like they could, and would, attempt to regulate out of existence by forcing it out of the economy they controlled. We know this will happen because it is happening.
But the biggest threat of all is what happens when governments attempt to over-regulate anything that people care a lot about. People will break the law. Most likely, they'll use crypto-currencies to do it. And, of course, regulators will blame the crypto-currencies.
As governments attempt to regulate their financial sectors such that people do not have financial privacy and are not free to even pursue lawful activities, as they have been doing, there will be a continuing rebellion. The genie cannot be stuffed back into the bottle -- you cannot shut off crypto-currencies any more than you can shut off the Internet.
Regulators have a seat at the table, and they can shape crypto-currencies into a lawful future where people can have financial privacy and the ability to freely pursue lawful activities. But if they get up, they will not get their seats back.
Imagine if the United States decided in the 80's that the Internet was being used to distribute child pornography, violate copyright, and spread extremism and that therefore it was going to be illegal (or heavily regulated) in the United States. What would have happened? There would still be an Internet -- it just would have been developed primarily in China, the United Kingdom, Australia, and so on.
At some point, the United States would have faced a "take or leave it" choice, and surely we'd have no real choice but to take it. But would the Internet have reflected American values? Would America have the power and control they enjoy today? Would we have an authoritarian Internet? Surely, nothing American regulators had said would have mattered after their choice not to participate.
There are lots of crypto-currencies out there. Lots of things are being done with block chains. This definitely seems to be the next big thing. And I feel quite confident predicting that the world will change. But people need to get their head of the sand.
In the early days of the Internet, it might have seemed sensible to try to control the flow of information by regulating newspapers. In the United States, the First Amendment prevented this, but certainly other countries have tried, and are trying, this. It doesn't work today. In fact, it makes the newspapers weaker.
We can avoid a war on cash that's a repeat of the war on drugs. Most people in the crypto-currency community don't want to help terrorists, extortionists, or human traffickers. But if regulators are not reasonable, they will lose control over money the same way they have lost control over information. Now that the technology is here, it will no longer be possible to impose a regime that more than a small minority do not want.
A good first step would be acknowledging that the existing KYC/AML/BSA framework (as used in operation choke point) makes a mockery of due process. If you want to make something illegal, pass a law prohibiting it. Provide people with notice and go through the Democratic process. Governments should not be having secret dealings with businesses to get them to ostracize those the government secretly disfavors.
I replied to their Tweet: "Serious question: If we get rid of big bills, how will people who FI's refuse to do business with make major purchases?" I don't think they'll have any answer for me.
The views expressed above are my own and do not necessarily reflect the views of my employer or anyone else.
