Cash and the Politicisation of Payments

What do the KGB, the Chinese Communist Party, the Canadian Prime Minister and the UK’s Brexit campaign leader have in common?

In reality not a lot, but all point to a common theme, which is about the increasingly unhealthy symbiosis between payments and political control. And it’s not good for freedom. Nor for cash.

Let’s look at the KGB first. In 1971, it investigated a new kind of surveillance system that would enable it to keep track of everyone inside the Soviet Union without them knowing about it. It tasked a group of computer scientists and surveillance experts to come up with something innovative, and that something was to eliminate physical cash and replace it with a digital currency system.

This system could gather data about your financial transactions – including every book you read, every magazine you subscribe to, and every political organisation you donate to. It could also flag where you were every time you made a transaction.

The KGB never built this system – physical cash lived on in the Soviet Union.

But the fact remains that it decided that you couldn’t do much better than digital-only cash if you wanted to build an unobtrusive surveillance system. Which is one of the main libertarian concerns about central bank digital currencies.

Now to China, a pioneer in cashless transactions, propelled by Alibab’as Alipay, and Tencent’s WeChat Pay which now boast of over 1 billion users each.

In the aftermath of the COVID 19 pandemic, China launched its digital currency, the digital yuan or e-Yuan, in its bid to become a cashless society using contactless payments, and it is poised to become the first country in the world to do so.

Predating all of this, in 2014 the government introduced plans for a social credit system that tracks and records businesses, individuals and government institutions, evaluating them for trustworthiness. It is an extension of the existing legal and financial credit rating system and is being managed by the National Development and Reform Commission, the People’s Bank of China and the Supreme People’s Court. Once implemented, it will manage the rewards or punishments of citizens on the basis of their economic and personal behaviour.

Whether the system is benign or not, it is an example of a state systematically collecting and evaluating detailed payment and bank account information across society.

Let’s consider Canada now where, in February 2022, truckers blocked the streets over new regulations on compulsory COVID vaccinations. The government’s response was to freeze the bank accounts of about 200 individuals driving those trucks and organising the protests.

In other words, one of the most liberal countries in the world sought to break a protest by stopping people’s ability to pay.

In the UK, Nigel Farage led the successful campaign to get the UK to leave the European Union. As a result, a significant number of people regard him as an extremist, a populist and a generally bad person.

He banked with a small bank, Coutts and Co, who informed Farage that they were terminating his bank account, one he had with them for many years, initially saying it was a commercial decision. The since-resigned CEO of Coutts' parent bank NatWest had dinner with a BBC journalist and told him that the account was being closed because Farage had not maintained sufficient funds in it, in an egregious breach of customer confidentiality. All of this proved to be untrue.

The truth is that the bank had collected a dossier of press reports that suggested he held extreme views and decided that he did not align with their ‘values’.

Farage went public and has been vindicated in his claim that he was ‘debanked’ because of his personal views, arguing that banks are there to serve customers and make money, not involve themselves in ‘virtue signalling’.

He has since launched a campaign to assist many thousands of others who have been similarly debanked for their political views or the nature of their business, and is now a firm advocate for cash, stating that a society without cash is at the mercy of the state.

He isn’t wrong. In this day and age, it is becoming increasingly difficult to function without being connected to the financial system, and one doesn’t have to be a conspiracy theorist to see how technology designed to facilitate payments can segue into tools of surveillance and control.

One kind of expects that from authoritarian regimes. However, even recent history tells us that governments easily slide into actions that infringe the liberties of its citizens (just look at what happened during the pandemic).

Controlling how people pay by removing the ability use cash simply gives them the means to do so.