NEW YORK (InsideBitcoins) — No matter where you go in the world, there is a good chance that the local government is not a fan of cash transactions. Cash in the form of U.S. dollars has long been the currency of choice for terrorists, drug dealers, and other individuals who earn an income by breaking the law, so it should be no surprise that local police departments and politicians want to at least limit the use of physical cash. Although an outright ban on certain cash transactions is already the law of the land in some countries, Bitcoin could potentially make these bans rather fruitless.
Why governments hate cash
In short, governments hate cash because they don’t want criminals to have any form of financial privacy. The issue with this train of thought is you have to compromise everyone’s privacy to limit the privacy of criminals. In general, governments have a thirst for collecting as much information about their citizens as possible.
Although there is an implied right to privacy in the United States (as acknowledged by the US Supreme Court), various three-letter agencies claim to have found a loophole in situations where personal data, perhaps one’s financial history, is stored by a third party, such as a bank. In other words, the NSA is bound to get upset when cash transactions disrupt their mandate to “collect it all.”
In addition to the recent complaints from the Finnish police, multiple countries in the European Union already have bans on cash transactions in amounts as small as €1000. These kinds of moves towards a cashless society should be troubling to anyone who believes in financial privacy and censorship-resistant payments. It becomes rather trivial for a government to track every citizen’s history of transactions when all of that data is stored at a handful of banks around the country.
Increasing bitcoin’s value proposition
As the cashless society moves from science fiction to reality, Bitcoin could be the key to protecting financial privacy in the digital age. In reality, bitcoin is another form of cash.
The problem for law enforcement is that there’s no practical way to ban it. After all, governments do not control the supply or issuance of new bitcoins. They can turn off the printing presses and make dollars and euros completely digital, but it’s unlikely that they’ll be able to prevent people from using Bitcoin.
This dynamic actually has the potential to build new-use cases for bitcoin as money. If physical dollars and euros have been completely removed from society in 20 years, criminals will still need a form of money to use for their business activities. It’s possible that bitcoin and gold could take the place of the U.S. dollar and euro as the main forms of money used on the black market in this scenario.
Does it make sense for governments to ban cash?
Once you remove cash from the equation, the idea of government-controlled money becomes a bit questionable, to say the least. As you take a step back and think about what the dollar or euro could become without cash, it looks a lot like some kind of Orwellian nightmare where all financial activity is under the watchful eye of Big Brother.
For better or worse, the fact that fiat currency cannot be used on the black market would definitely put it at a competitive disadvantage against bitcoin, gold, and other forms of private money. The choice is then between a currency where all of your transactions are tracked in a database or a form of digital, untraceable cash that provides privacy and censorship-resistance.
Although removing cash from circulation may seem like a grand idea to certain regulators and bureaucrats right now, such a move could actually have the potential to weaken government-issued currency and stifle control over the monetary system as a whole. Bitcoin has reopened Pandora’s Box in the form of competing currencies, and participants in the black market are customers just like everyone else.
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