Even at the very heart of the EU’s political establishment, a majority of people believe that a cashless society would not be beneficial for the general public or the economy.
Few organizations have tried as hard to curtail the public’s use of cash as the European Commission. A few years ago it was considering imposing EU-wide cash payment restrictions but ended up shelving the plan in 2018 after a public backlash. A year earlier, 95% of respondents to a public consultation run by the Commission, many from cash-loving Germany and Austria, had said they were opposed to the idea. Even more emphatic was the answer to the following question:
“How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation (multiple replies are possible)?”
In the curious absence of an explicit “not at all” option, 99.18% chose to respond with “no answer.” In other words, less than 1% of the more than 30,000 people consulted could think of a single benefit of the EU unleashing cross-regional cash limits. In the end, the Commission concluded that “limiting cash would not prevent the financing of terrorism and would be considered a violation of the personal freedom of Europeans.”
But it did not end its war on cash. While the Commission may have pressed the pause button on its campaign against physical money within the EU, it was rapidly escalating its actions at the EU’s borders. As I reported for WOLF STREET at the time, the Commission had proposed a raft of measures to tighten cash controls on people entering or leaving the EU, most of which were eventually ratified by EU Member States and the EU parliament.
Since then many national governments have taken up the baton. Spain and France have imposed some of the lowest cash payment limits in the EU, each of just €1000, though in the case of France the rule does not apply to everyone: well-heeled non-residents can spend as much as €15,000 in cash transactions. In Belgium, there has been a limit of €3,000 since 2014, while in Greece the cash ceiling is €1,500. More recently, the Commission took umbrage at the Meloni government’s proposals to lift Italy’s cash payment limit from $2,000 to €5,000 and repeal punitive measures for retailers who refuse to take card payments, arguing that they will weaken Italy’s ability to fight tax evasion.
Little Love for Physical Money
In other words, the European Commission has little love for physical money. Which is why it came as somewhat of a surprise to see that it had included an Oxford-style debate on the pros and cons of a cashless economy at its annual economic event, the Brussels Economic Forum, held last Thursday at the Brussels Convention Centre. The motion under debate was:
“This forum believes that a cashless society would be beneficial for people and the economy.”
Speaking in favour of the motion was Cecilia Skingsley, head of the Innovation Hub at the Bank for International Settlements, the central bank of central banks, and former deputy governor of Riksbank, Sweden’s central bank. Speaking against was Brett Scott, a financial journalist and author of the book Cloud Money: Cash, Cards, Crypto and the War for Our Wallets.
Things got pretty interesting from the get-go. Before the speakers spoke, the event’s attendees were invited to vote on the resolution. A slim majority (52%) voted against the motion while 48% voted in favour. In other words, even at the heart of the EU’s political establishment, at the EU executive’s flagship economic conference, most people believe that a cashless society would not be beneficial for the general public or the economy.
Then the debate began. First to speak was Skingsley, who gave a rather weak defence of the motion, describing cash as “no longer fit for purpose given the technical changes we observe around us.” For a start, she said, cash does not promote access to financial services beyond people’s “most basic needs.” In other words, people who only use cash are cut off from “the services being offered by the financial system: they don’t have access to credit, to safe savings products or insurance, and they can only use the most basic credit services.”
This was the essential thrust of Skingsley’s argument: people who only use cash because they have no other options are condemned to eke out a finance-free existence where they have to pay more for credit and other financial services. It doesn’t seem to occur to her that the main cause of this problem is accessibility (or the lack thereof) to financial services for certain segments of the population rather than the ubiquity of cash. Indeed, if it weren’t for the widespread availability of cash the so-called “unbanked” would have no means of payment at all.
Anonymity a “Two-Edged Sword”
She also described anonymity as a “two-edged” sword:
It has a major shortcoming. It means that others don’t know who you are and they can’t figure: are you a good payer, can you handle a saving (sic), can you carry a loan?
Presumably by “a saving,” Skinsgley means “a savings account”. By “others”, she appears to be referring once again to banks and other financial services companies, which are currently in the dark about the creditworthiness of unbanked citizens. Again, most of the emphasis is on the potential benefits of a cashless economy for financial services providers as opposed to their actual users. In fact, Skingsley rarely mentions the benefits of a cashless society for everyday citizens, presumably because those benefits barely extend beyond a few minor gains in time and convenience as well as the ability to access financial products, with all the benefits and risks that entails.
Ultimately, most of the benefits of a cashless economy will accrue to the financial and tech companies for whom cash is a major competitor. These companies talk all the time about the social benefits of “financial inclusion” but as a recent article by the Committee for the Abolition of Illegitimate Debt (CADTM) notes, their ultimate goal in expanding digital financial services to the world’s unbanked while undermining cash is to “recruit as many new clients as possible, the better to be able to quietly extract a never-ending stream of value from intermediating their trillions of dollars’ worth of tiny financial transactions.”
Skingsgley also dedicated a large part of her talk to trying (and largely failing) to assuage fears about the potential dangers of a cashless society. These, she said, include the public’s fears around big tech and financial companies erecting a “big brother” society. Her answer to that problem is to give more powers to government (as in, EU) entities to use their legislative, regulatory and supervisory powers to ensure they can’t.
The problem here is that many government agencies are already captured by the financial and tech companies, although the EU has probably done more than most governments to push back against the power of big tech. Also, there are justifiable public concerns about governments and central banks, with the help of big tech and financial companies, ushering in their own “big brother” society through the introduction of digital identity and central bank digital currencies — a topic that was almost entirely — and conspicuously — absent from this debate.
Arguably the biggest weakness in Skingsley’s argument was her insistence that a cashless economy is necessary to achieve genuine digital inclusion. As her debate opponent Brett Scott pointed out, one option should not come at the exclusion of the other:
Promoting digital inclusion does not mean you’re getting rid of the other system; it means you’re providing a balanced system of multiple options. That’s what digital inclusion is all about. You entirely can have a cash economy alongside a digital economy.
The Three Insults Against Cash
Yet in today’s discussions around technology and money, digital automation is invariably presented as not only desirable but also inevitable, while cash is broadly painted as having negative impacts on society, said Scott:
The three major categories of insults that are thrown against it are that it is old and outdated; that it is somehow inefficient and inconvenient; and that it is dangerous and creates social ills. These are the things that anti-cash proponents throw at us.
To try to help break this narrative and recalibrate the way the event’s attendees thought of cash, Scott offered two metaphors.
Metaphor #1: The Banking System as a Casino
“Like a casino, banks give us digital chips in exchange for our cash. Our confidence in that digital money is predicated upon access to cash. Ironically, if you undermine the cash system you simultaneously undermine public confidence in the digital system. Even if you don’t like cash, even if you perceives it to be inefficient you’ve got to realise that it actually underpins the digital system itself.”
“Imagine if a casino was going to prevent you from going back with your chips to redeem them for cash? That’s basically what banks do when they shut down ATMs: they’re saying we’re going to stop you from exiting our systems. You’ll have to use our digital chips. That’s why the cashless system is a euphemism for a type of enclosure by the banking sector and big tech.”
Metaphor #2: Cash as a Bicycle
Even in a world of rapid technological and behavioural change, cash still has a vital role, says Scott. “If I’m in a skyscraper, I’ll probably want to use the lift but that doesn’t mean I want the stairs taken away.”
In much of the talk around money today cash is often portrayed as a bygone product, much like the horse and cart following the advent of the motor vehicle. But according to Scott, cash is more like the “bicycle, or even the mountain bike, of payment systems,” while digital payments are like Uber. If Uber was the only transport system available in today’s towns and cities, we would have an unnatural monopoly with all of the associated problems that would bring. The same would happen if cash was replaced by an exclusively digital payments system, says Scott:
“If you get rid of the cash system, all the worst excesses of the [digital payments] system would come out.”
There would also be serious resilience issues. Digital payments systems go down whenever the electricity and/or mobile network go(es) down, a cyber attack takes place or there’s a bug in the system. Scott also highlighted the potential dangers of excessive data harvesting, exclusion problems, over-centralisation of the money system as well as the “risk of authoritarian states using people’s dependence on the digital money system to control behaviour.”
Just as today many city councils are encouraging people to use the car less and the bicycle more, governments should also be doing everything they can to preserve cash’s role in the economy. Ultimately, as Scott notes, keeping cash alive means maintaining a balance of power between different payment systems:
It is important not only to protect cash but to promote it as superior in many situations, as the bicycle is often better than Uber in certain situations.
Scott also notes quite rightly that there are many people who actually continue to enjoy engaging in human-scale local transactions, which are best facilitated by cash. This is true across vast swathes of Europe’s economy. Even after three years of the COVID-19 pandemic, during which time cash was demonised globally for spreading the SARS CoV-2 virus, cash remains the most frequently used means of payment in stores, accounting for 59% of point-of-sale transactions in 2022, according to the European Central Bank’s latest payments study.
Even in the heart of Brussels, at the European Commission’s flagship annual economics conference, most people do not believe that a cashless society would be beneficial for the people and the economy. In fact, after the debate the number of people who disagreed with the motion surged from 52% to 72%. Which perhaps goes to show that if there is an open, frank debate about the potential risks and benefits of a fully cashless society, most people — including many close to the levers of power — will end up rejecting it.
Thanks for this post. Good news.
I am in favor of progress too, but I am afraid that most of the folks in Brussels don’t know what It is.
What flora said, Nick! A friend left yesterday with his family for 10 days in Spain. The 1000 Euro limit on cash payments did not impress him at all. And he is “fully banked” as they say, and very credit worthy. No good reason he should not be able to pay his hotel bills in cash if he chose to do so.
So that means if they really want to do it they’ll just shove it down the EU citizens’ throats like they do every other thing we don’t like. As I recall, many EU and ECC citizens didn’t want to join in various treaties so they made them vote over and over again until they voted the “right” way. The EU has no respect for democracy and neither does the US. They just mouth pieties and keep the oligarchic enterprises rolling. Until we stop this juggernaut, they will continue isolating us, sickening us, impoverishing us and getting us to hate each other.
Maybe Brussels is waking up the the fact that under a digital cash regime, that it would be impossible to hide a slush fund or a cash payment as a bribe. All you need is just one computer hack by unfriendly parties and it all comes out to the very last Euro. At the moment transporting money by diplomatic bags is still safe but under a digital cash regime? Not so much. You can bet that under a digital cash regime that the Ukrainian reconstruction fund would be a primary target by quite a few governments.
Meh, direct money bribes are for the proles. The elite do so via completely legit speaking fees etc, and non-monetary reciprocal favors.
That Australian TV Comedy Utopia/Dreamland captured this issue in one of their episodes. The Australian government scupered the initiative (in the series) as soon as they realized that their information is also included…
Not talked about is the cost of the Digital Payments, and who pays it. As a merchant, cash transactions cost us very little, but Digital Payments cost anywhere from 1 to 6%. This despite the fact that the actual cost of the transaction is likely very low. In other words, banks like Digital Payments, because they are effectively a “tax” on every transaction in the economy that they get to collect. Unlike a tax collected by a government, there is no benefit accrued to anyone other than a banker. At least with a tax collected by a government citizens receive a service in return.
Fully agree and this drives my card vs cash decision as a consumer. Card for bigger amounts in big stores or chains. Cash in small, independent stores or at our local market. Why should we have to help the banks to collect these exorbitant fees?
It is all about control. Not control of terrorists, smugglers or financiers that will always be able to find alternatives but control of the peasantry so much despised by the EC and the Globalist PMC in general. That is why they cannot help but insist with a project that nobody wants. Last weekend (long 4 day weekend with labour day and an extra day) I went to Brussels to visit my daughter. Very little cash used there compared with, let’s say, Madrid. Nevertheless, I carried some 80€ in cash for the 4 days and It was always preferred when I offered it as an alternative.
Thank you Nick. Good reporting as usual, and nice metaphors.
Another factor in favour of cash: better instant control of expenses. Plastic is crazyness
EU seems to have become all kinds of spooked about banking in recent years.
Probably thanks to some scandals about various European banks being used to wash transfers from Russia etc.
All of this is true, of course, but it’s also true that drug-related crime, which is making inner cities in many western countries unliveable, depends entirely on cash, and will not be able to find a substitute. Half an hour’s walk from where I’m typing this are areas where drug gangs control all movement at night, and settle trade disputes with automatic weapons, and where the Police don’t go. Life is pretty much hell if you live there. I don’t pretend that that’s all there is to the argument, but from the point of view of ordinary people, it shouldn’t be neglected.
Legalize drugs in a controlled way and watch the drug cartels crumble.
Thats the real issue here.
Also, crypto would be used by these gangs in a cashless environment.
Legalisation was a big idea a generation ago, but it hasn’t worked: indeed, it’s turned countries like the Netherlands and Belgium into virtual narco-states. The basic problem is that decriminalising purchases for personal use has massively increased the size of the market, the number of cartels that are involved and the violence among them. If you go further – licence to sell drugs to individuals, licence to run shops etc. you not only grow the market even further, you create all sorts of incentives for dealers to circumvent the rules and make profits that they could never make legally. Since it’s improbable that, say, cocaine would ever be sold legally without the same protections as alcohol, then it’s obvious that legalisation creates a massive black market for those who can sell more cheaply, sell to minors, sell in larger quantities and sell without quality controls (eg cocaine mixed with fentanyl.) This would make the illegal market larger and more profitable than it is now.
In any event, until the day when you can buy heroin legally and with no restrictions from the corner shop, transactions will continue to be in cash, and life will be unliveable for the populations of some cities. (You may have seen there was a rash of drug-related gang murders in Marseille recently.) The kind of illiterate drug dealers who pollute the lives of residents of tower blocks a few kilometres from here aren’t exactly going to sell their drugs using blockchains. Paradoxically, the only policy that does actually affect the problem is to hit the point of sale: arrest dealers, and keep arresting them until they decide to get another job, and the cartels can’t recruit anyone to do the selling. But that’s politically impossible.
David, strikes me as an apple for oranges comparison. I recall your very clear and strong stance in favour of vaccination mandates in France, and the importance of penalising to the full extent, anyone in France refusing to be vaccinated. Because it put others at risk (your words). Are you in favour of banning cash in order to protect society?
No, I’m not, and it wouldn’t work in any case. It’s rather that there are dimensions that are forgotten here, if you view a cashless society as a purely civil liberties issue. In many ways it is, but every initiative of this kind carries with it a whole series of good and bad consequences, which have to be clearly set out, and the bad have to be accepted with the good. I don’t personally favour a cashless society, but I just think we have to recognise that it could have good effects (apples) as well as bad effects (oranges), like pretty much all developments, really.
I am very much sceptical about the possibility of controlling drug consumption and trafficking by means of cashless societies. This is an excessively complex issue and I really don’t see that this indirect approach might necessarily be the solution to the drug problem. I have always though that the best efforts should try to control production but we have thrown in the towel. IMO resorting to such indirect approach is lacy policy with unknown consequences.
Drug consumption and trafficking has indeed important societal consequences but this activity wouldn’t be the only economic activity theoretically harmed in a cashless society. May be not in Brussels but in the rural side of life, and in the urban side too in many countries, cash is king and some other activities depend on it. These may be totally unimportant in GDP terms but lots of people really depend on those activities and the collateral damage would be significant.
It will be a cold day when I use Venmo, Apple Pay, or anything involving a phone. My wife is a bit of a prepper, which isn’t a bad thing as we do have a bit of physical metal around if we need or are forced off the grid.
I suppose everyone can agree that EU mandarins have absolutely no interest in what their taxpayers, sorry, prisoners, think.
We all now know of the “zero CO2” incentive, turning into an enforceable policy, maximum 13kg meat yearly, maximum 6 garment pieces yearly. What is not to like I ask you?
A 2025 improved version of all this, we’ll be having to deliver our kids into government pens daily weekly or fortnightly, for processing. Just like boarding schools but sans £25k in fees.
I am just winning every day.
What happens when the power grid aka electricity, etc., is damaged and shuts down? Where I live, this is a legitimate concern as we have our yearly hurricane season approaching. I have emergency funds in both paper and metal just for this purpose.