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Governments around the world appear to be waging war on cash. France is considering banning cash for transactions above 1,000 euros, and a number of other governments are eliminating their highest-denominated notes. But might the elimination of cash also make us less safe?
Cybercrime has reached unprecedented levels and costs the global economy $445 billion each year. The monetary value of digital data and services drives this. For example, the prices for stolen credit card credentials can be as high as $100 apiece, $9.95 for debit cards, and $5.60 for stolen usernames and passwords. Research suggests web sites transferring illicit goods and services using online front stores to process payments are generating around 10% of the traffic that legitimate sites do.
A cashless economy won't stop illicit financial flows-- estimated at $1.1 trillion in 2013-- finding a way into banks. About 45% of those flows end up in offshore financial centres after being laundered through the international banking system. Criminals might find ways to hack the databases of banks, diverting vast amounts of money towards themselves or even holding financial institutions to ransom.
Then there's the potential cyber threat from government itself. In principle, currencies could be invalidated, funds frozen or seized, and bailings implemented should our banks become insolvent, as they did in 2008. But since we can't go back to a world of cash, these dangers will exist whether or not cash is finally phased out.
