Privacy

Data Surveillance Shows Why We Need Cash, Cryptocurrencies

A cashless society is a monitored (and potentially controlled) society.

|

Cashier
Gstockstudio1 / Dreamstime.com

Data privacy issues can be tricky for libertarians. On the one hand, the shortcomings of government intervention are significant and predictable. Regulations often fail to accomplish intended goals while empowering incumbents and burdening consumers. A "cure" should not strengthen the disease.

On the other hand, internet platforms can be really terrible. One needn't be a commie pinko to take umbrage with invasive, misleading, or even outright fraudulent data tracking and advertising practices—to say nothing of some tech giants' sneaky little habits of sharing data or tracking technology with governments.

Here is an example: The retail giant Target is known to have quietly tracked card payments to build behavioral advertising profiles for each customer, whether one liked (or knew!) it or not. Their statisticians were able to predict which customers were pregnant, "even if she didn't want [them] to know," and target surreptitious ads to make a lifetime shopper of them.

In one case, the company inundated a teenage girl's mailbox with "advertisements for maternity clothing, nursery furniture and pictures of smiling infants," tipping off that girl's father to the unplanned pregnancy before she got a chance to break the news.

Such arrangements may not be strictly "involuntary." No one is forced to shop at Target. The company's purpose is to maximize profits; why shouldn't they leverage freely given information? Some people may not think these big data antics are a big deal, or they might even appreciate that companies proactively send them tantalizing deals.

But private data surveillance is usually clandestine, and to many people, creepy. It is also more pervasive than many realize. Besides, should buying toilet paper really be this adversarial?

In this case, we don't need to choose between clumsy government regulations or submission to uncontrolled data harvesting. We have already had a robust market solution to marking tracking for about a decade now: Digital cash is a market escape from the financial panopticon.

My colleague Jerry Brito made the case for digital cash as a fundamental tool of human autonomy in his recent paper, "The Case for Electronic Cash." (I helped with research for the study.) It explains how cryptocurrency provides a check against malfeasance by public and private bodies. Or to paraphrase the economist Arnold Kling: Intermediated markets fail; that's why we need disintermediated markets.

People rightly praise cryptocurrencies like bitcoin for their privacy-preserving and hard currency properties. They give us important tools to counter government overreach.

But Brito's paper highlights a novel and underappreciated benefit of cryptocurrencies. Direct person-to-person exchange online also provides a critical alternative to private intermediaries that could exploit or limit our transactional freedom. That is to say: Digital cash preserves our financial autonomy.

The existence and usefulness of cash, and by extension digital cash, may seem uncontroversial. It's a good way to settle a tab among friends, or perhaps preserve the surprise of a partner's gift by keeping it off the joint account history. Cash has been around forever. Why kill a good thing?

Many influential thinkers find ample reasons to bash cash. Some economists bemoan physical currency as a pesky impediment to monetary tinkering on negative interest rates. Others see it primarily as a vehicle to evade taxes and starve social programs. And everyone knows that criminals just love big sacks of money.

Serious efforts are underway to do away with cash altogether. In some countries, it's not even forced. Brito discusses how cash use is naturally dwindling in places like Sweden and Norway because cards and mobile payments are just so convenient. Credit card companies are shrewdly spending money on marketing and incentive campaigns to lure people away from cash; fewer cash payments means more fees for them.

We are doing more and more commerce online anyway, and financial technology companies like PayPal and Square provide us with more options than ever. Might cash just be a dinosaur whose extinction event has come?

Actually, the fact that more commerce is facilitated by intermediaries online makes the existence of cash, and especially digital cash, all the more important. If cash were to die, so would our financial autonomy. In the words of Brett Scott, "a 'cashless society' is a euphemism for an 'ask-your-banks-for-permission-to-pay' society."

Every time we make an intermediated payment, we are relying on that third party to faithfully execute our exchange. They can, and do, make mistakes or get hacked. And as mentioned earlier, they can leverage the transaction data gathered from our exchanges in ways that we do not appreciate.

More troublingly, they can flat out refuse to clear any transaction at any time. Maybe they maintain a blacklist of parties or goods for which they will not transfer funds. In the past, governments pressured companies to maintain blacklists. These days, we are seeing more intermediaries build blacklists of their own accord based on things like the political values of their employees.

The state cannot resolve these problems. After all, it is often governments who push intermediaries to track or censor payments in the first place. Even when they do not, their "solutions" too often merely make the problem worse.

Digital cash is the solution. Cryptocurrencies like bitcoin afford us with financial autonomy by allowing us to send money directly without the need to rely on a third party. No permission needed. Other technologies called "privacycoins" attempt to build even more concealment by default, and other bitcoin-compatible anonymity techniques exist as well.

Cryptocurrencies, privacycoins, and their associated infrastructure are not perfect. But they are improving all the time, and they are a lot better than a life without any alternative to a totally intermediated and therefore surveilled financial world.

None of this means the fight to preserve our financial autonomy is already won.

There are many efforts to undermine or even ban cryptocurrency. Beyond the legal sphere, there are social and technical hurdles. Not everyone has access to the infrastructure or know-how to securely keep and send digital cash. And it's not like the Targets of the world have an open Lightning channel (yet).

The first step, as Brito points out, is to recognize the critical role that digital cash plays in securing our financial autonomy. Digital cash should not only be defended, it should be celebrated and encouraged. Cryptocurrency is more than a tool to avoid government overreach, it is also a market-provided solution to market-created surveillance problems in the digital age, and a fundamental way to preserve commercial independence.

Advertisement

NEXT: If We Can't Cut Entitlements, What Can We Do?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Hi everyone I just got paid $858o working off my computer this month. And if you think that’s cool, my divorced friend has twin toddlers and made over $9k her first month. It feels so good making so much money when other people have to work for so much less. This is
    what I do/?? http://www.Aprocoin.com

    1. Start working at home with Google. It’s the most-financially rewarding I’ve ever done. On tuesday I got a gorgeous BMW after having earned $8699 this last month. I actually started five months/ago and practically straight away was bringin in at least $96, per-hour. visit this site right here……. http://www.payshd.com

  2. I wonder when Reason will connect the dangers of a cashless society to what they ignore as The Market In Action – banks and other financial entities ‘voluntarily’ cutting off people with the wrong beliefs?

  3. I pay with stuff that folds or jingles whenever I can. The young’ns think I’m crazy.

    1. At least you’re not holding up the checkout line waiting for your card to talk to your bank so that you can buy an apple.

      I still check my change for pre-1965 silver. It’s getting rarer, but you still see some.

  4. I get paid over $180 per hour working from home with 2 kids at home. I just got paid $ 8550 in my previous month It Sounds unbelievable but you wont forgive yourself if you don’t check it…. http://www.Mesalary.com

  5. Google is now paying $17000 to $22000 per month for working online from home. I have joined this job 2 months ago and i have earned $20544 in my first month from this job. I can say my life is changed-completely for the better! Check it out whaat i do…..

    click here =====>> http://www.Geosalary.com

  6. The fees that credit card companies will likely be the turning point for small businesses.

    They have to pass on those fees to customers and many of the small companies that I visit wont accept credit card swipes for less than $5 in sales.

  7. Disconcerting article last week in WSJ about kids getting cash / coin gifts, and wanting their parents to deposit it ASAP so they can spend it (as digital).

    It is going to be so easy to control the next generation: just shut off their access to their ones and zeros.

    A nation of sheep, being lead to the slaughter….

  8. The real issue it seems in the US is that most people really don’t care about privacy or freedom, only comfort and security.

  9. It’s a hobby of mine to look at things which are described as impossible-to-regulate panaceas for privacy and imagine where the government might in fact ban or regulate such a thing– through sheer force of will.

    Does anyone see a situation where digital currencies are simply banned for use in the mainstream economy, relegating its use to the black or grey markets? Since *most* of us do our shopping on Amazon or Target or Safeway, if we can’t purchase there, then that sort of relegates us to direct seller-to-buyer transactions for various… “one off” items.

    I’m not against digital currencies (well, there are some technical issues which make me distrustful of their use as a widely accepted form of currency) but I can see all kinds of ways that the government could in fact track their use and ironically more easily identify you as the party behind the transaction.

  10. I don’t have an issue with targeted ads. That’s time spent viewing items I don’t care about. Ads become less annoying when they’re properly targeted and actually products I might consider using.

  11. I like cash. I like my privacy from government and corporate snoops on principle. I like the fact that if a retailer has a “data breach”, the cash I have given him puts me at no risk. I like being able to pay a person I do business with in a way that is final, without intermediaries, and respects his privacy. I don’t see the US government banning cash even though doing so would make it easier to control us. It is necessary for issuers of fiat money to have the public accept it as something real. Having the opportunity to convert deposits on ledgers into bills and coins helps create or reinforce a sense of reality for the money. Besides if government issued cash were banned, people still could trade privately with foreign currency, silver and gold coins, and so on. I have nothing against cryptocurrencies, but I think people should be cautious. Our government is very jealous of its monopoly on creating money. If something such as bitcoin ever became more than a nuisance, the feds might find a way to ban it. So I plan to stick to the greenbacks as my private money for now.

  12. Cryptocurrencies have drawbacks. Since they are currencies, they
    involve risky speculation. Bitcoin and Etherium have giant carbon
    footprints. Their security is dubious now that mostly Chinese are
    doing the mining. They facilitate tax evasion. And they are not
    reliably anonymous — there are ways to figure out who you are.

    We have developed GNU Taler, a payment system in which the payer is
    truly anonymous. If you buy X today and buy Y tomorrow, neither the
    stores nor the state can ascertain they were bought by the same
    person, let alone who that person was. The payee, the store you
    bought from, is not anonymous.

    See taler.net for more information.

    Until I can buy things with Taler, I insist on using cash and only
    cash. I do not buy on the internet.

  13. Cryptocurrencies have drawbacks. Since they are currencies, they
    involve risky speculation. Bitcoin and Etherium have giant carbon
    footprints. Their security is dubious now that mostly Chinese are
    doing the mining. They facilitate tax evasion. And they are not
    reliably anonymous — there are ways to figure out who you are.

    We have developed GNU Taler, a payment system in which the payer is
    truly anonymous. If you buy X today and buy Y tomorrow, neither the
    stores nor the state can ascertain they were bought by the same
    person, let alone who that person was. The payee, the store you
    bought from, is not anonymous.

    See taler.net for more information.

    Until I can buy things with Taler, I insist on using cash and only
    cash. I do not buy on the internet.

  14. If you still shop at target, you will to have your privacy violated; it is their company policy.

  15. One thing about cryptocurrency – Your labor doesn’t get stolen through legislative inflation as is well demonstrated by bitcoins extremely strong pricing index and growing value. It does seem to however carry the consequences of self-induced Ponzi schemes to it where “popularity/fad” speculation is causing instability but I image through time “the people” will get wiser/learn.

    Just hope the market starts acknowledging and accepting cryptocurrency as payment for goods so it doesn’t end up being nothing short of a speculation lottery game.

  16. I think that the future is cryptocurrency. It is the cryptocurrency that will be new money in the 21st century. Perhaps Bitcoin will become the main cryptocurrency like a dollar. For an example here https://bitcoinbestbuy.com/what-is-bitcoin/ you can find more information about bitcoin.

Please to post comments

Comments are closed.