The War on Cash Accelerates, Bitcoin Regulation Tightens

“The European Commission has quietly launched the next round of its war on cash… The European Central Bank is working to launch a Trojan horse blockchain network just to trick the naive into trusting it,” Activist Post said in an article on Feb. 9.

After the World Economic Forum in Davos in January, the war on cash accelerated, regulation of Bitcoin began to tighten, and elites from all over the world planned various economic rules.

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The war on cash is a war to eliminate physical currency and drive all monetary transactions into the digital realm. In the eyes of some Bitcoin enthusiasts, this is a sign that digital currencies will have more legitimacy and wider adoption. But since the war on cash is a desired goal of countries and central banks, the digital realm will inevitably be controlled by the state and closely regulated by the authorities. Bitcoin, as a medium for personal freedom and independence, will be strictly monitored. To a certain extent, the EU will weaken its competitors, which refers to the free market and people with different political views.

Fortunately, the situation is chaotic, even in the EU. This is fortunate, because of decentralization. The chaos of competing and independent alternatives brings freedom and opportunity. While France and Spain are happy to restrict cash transactions, Germany is strongly opposed, because about 80% of transactions in Germany are conducted in cash. At the same time, the European Commission has begun to strictly regulate Bitcoin to fight terrorism and crime, which has also caused a collective opposition from ordinary Italians. All kinds of opposition exist.

So why is the EU suddenly pushing for a cashless society and starting to strengthen its regulation of Bitcoin?

Davos Economic Forum in June 2016

The announcements accompanying the conference often reflect vague goals and non-binding commitments. Almost no one knows what actually happened at the meeting. These details need to be sorted out from the events and policies that directly occurred in the Davos conference, but there are two things that have long been considered extremely prominent by Davos people. One is that the currency crisis is on the verge of collapse, and the other is that Fintech is a major competitor to the mainstream system.

Nick Giambruno, along with other influential economic forecasters, sees the June 2016 meeting as having great historical significance. Giambruno, senior editor at Casey Research, points to several signs of the direction of history, including:

1. After the conference, the movement towards a cashless society began to accelerate significantly, and the voices for abolishing high-value banknotes increased. Mainstream media such as Bloomberg and the Financial Times called it a cashless society. Articles from the New York Times, the Economist, Zero Hedge, and other media outlets emerged in large numbers.

2. A few days after the Davos meeting, the head of the Bank of Japan implemented negative interest rates for the first time, despite his repeated denials.

3. Likewise, Deutsche Bank’s CEO called for eliminating cash, and Norway’s largest bank did the same.

4. Academics have joined in, with Harvard publishing a paper discussing the need to eliminate high-denomination notes, such as the $100 and €500 notes.

The war on cash, with negative interest rates at its core, is in full swing.

Why are negative interest rates necessary? This is because banks hold very little cash, and most of the currency is made up of numbers flowing through official computers. If people demand to withdraw cash, there will be a large number of bank runs, which may trigger a bank collapse. If only digital transmissions are left, such runs will not happen. In addition, banks can charge interest to trapped customers. In other words, people will be forced to pay a fee for using their accounts, which will create a vicious cycle. Instead of putting $1,000 in a bank account and having $5 deducted every month, it is better to spend the digital currency immediately and exchange it for real goods and services with more static value.

Of course, every transaction, every penny, every ledger is under state surveillance. These centralized funds can be easily taxed, frozen, confiscated, and trapped at borders. The analysis of purchased goods and services may become a pillar of social control.

But this brave new world of money is only feasible once the obstacles are removed, such as physical cash, Bitcoin, and physical transactions, and the authorities are well aware of this.

Davos Economic Forum in January 2017

After the new Davos Summit, two things happened:

1. On January 23, 2017, the European Commission published its 2018 'Commission Roadmap' for the fight against terrorist financing, also known as the 'Payments Restriction Plan' or the Cashless Society Plan (the EU stepped up its efforts towards a cashless society in 2017/18).

2. On January 28, a headline on Bitcoin.com read, “Bitcoin company Bitfury launches Global Blockchain Business Council (GBBC) in Davos.” Davos stated in a statement that “the GBBC intends to become a truly global institution for the blockchain and business ecosystem.”

An article titled “EU Seeks Cash Restrictions to Achieve ‘Cashless Society’” (February 7) succinctly comments: “Banners or restrictions on cash transactions, if implemented, would lead to people using alternative means to circumvent Big Brother’s regulation, and the EU anticipates the need for other (privacy) payment methods.” In short, the EU will heavily regulate Bitcoin and similar alternative payment methods.

in conclusion

The world is full of different monetary practices, policies and needs. Depending on the specific situation, the use of physical cash and Bitcoin will also be significantly different. They are more suitable for individuals rather than businesses and banks. However, it will become increasingly difficult to circumvent regulation, and countries will also set up many traps, such as Trojan horse blockchain networks.

One thing we should be clear about is that regulation should not be hailed as legitimacy, it should be seen as a death threat to individual freedom and the mobility that Bitcoin promises.

However, some Bitcoiners will cheer this, arguing that it makes Bitcoin reliable, not nationalized. Trading freedom for reliability is like trading freedom for security, which will only harm both.