Blockchains And The War on Cash | Hacked: Hacking Finance
Hacked: Hacking Finance


Blockchains And The War on Cash

Posted on .

Blockchains And The War on Cash


This article was posted on Monday, 19:33, UTC.

Currently, India faces devastating cash problems, unique and unprecedented especially for a country of its size. Governments of countries with highly developed financial systems too have proposed to scrape bank notes or at least decommission the highest denominations.

// -- Discuss and ask questions in our community on Workplace. Don't have an account? Send Jonas Borchgrevink an email -- //

In India, the government announced overnight their two largest denominations, worth roughly US$15 and 7.5 respectively, would cease to be legal tender immediately.

Citizens had about one month to convert their cash reserves into new notes, with many problems being reported around the availability of notes and long queues at the bank tellers.

// -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- //

As Bloomberg points out, less than 10% of all Indians have ever used another payment method other than cash, and only two percent have ever used a mobile phone to pay for something.

Other countries too consider stepping in India’s footsteps. There is a debate in Australia over whether the AU$100 note should be withdrawn from circulation, the European Central Bank has already made the decision to phase out the EUR500 bill, and in the United States Professor Kenneth Rogoff of Harvard University has made a name for himself by campaigning for the abolishing of cash altogether.

The arguments are always similar. Cash enables illicit transactions such as drug trade or illegal prostitution, its anonymous nature encourages tax evasion and bribery, and ever since we have entered the epoch of negative interest, there is concern that too much cash usage reduces the effects of central bank policy.

// -- Get exclusive consultation for as low as $249 per month on -- //

Blockchain as a proposed solution

Blockchain, the technology underpinning cryptographic tokens such as Bitcoin and Ethereum, has increasingly caught the eyes of central banks. China, for example, is rumoured to be building its own virtual currency on top of a blockchain-like system.

When central banks, or any banks for that matter, speak about Blockchain, they often do not refer to systems that work exactly like Bitcoin does. It is hard to imagine how a bank would favor building a system that they, in the long run, have no control over, and which they would not be able to derive profits from.

Private, permissioned blockchains are intended to keep serving the interests of the banks and governments, and will in effect function similarly to existing systems, requiring identification, being subject to seizure and monitoring.

There is natural demand for cash

Cash is not only popular because of its use as a private and discrete mechanism to transfer value. Its reach goes far beyond that of money laundering, drugs, and bribery.

Most importantly, cash can be received by anybody. An undocumented immigrant can receive cash in the same way as a small child, a machine, a felon or someone who recently declared insolvency.

Additionally, cash payments are highly reliable. While it may not be trivial to validate their authenticity, a cash payment never fails due to electricity outages, account irregularities or software glitches. Cash never gets stuck in the system, requiring “additional documentation” or repeated trips to the bank to unfreeze the payment.

Banning cash and replacing it with a private blockchain or government issued e-currency does not remove the demand for cash, nor will it be able to replace it.

Without making onboarding trivial and allowing those without legal documentation to safely and reliably bank on the new systems, the removal of cash from an economy removes certain activities in the short run, which is undesired in case these activities are legal. For many people, it is equivalent to a loss of their job.

In the long run, their prospects, and with them the prospects of the black market, depend on whether they can move their transactions into a space that functions quite like cash.

We might see the return of gold coins in commerce, or the rise of cryptocurrencies and their public, permissionless blockchains. Barter, too, can for a short time offer relief from unavailability of cash.


The demand for cash in an economy can be fulfilled by other mediums of exchange that a government has a hard time cracking down on. A move away from cash does not necessarily eliminate the undesired activities associated with it. Instead, gold, foreign currency and cryptocurrencies like Bitcoin are ready to fill the void.

Author: David Lang is Communications Manager at ExpressVPN, a Bitcoin accepting VPN provider. Images from Shutterstock.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.

Feedback or Requests?

Edward Talliot

Edward Talliot

Multiple journalists and analysts are behind the name Edward Talliot.

There are no comments.

View Comments (0) ...
The team:
Dmitriy Lavrov
Dmitriy Lavrov is a professional trader, technical analyst and money manager with 10 years of trading experience. He covers Forex, Commodities and Cryptocurrencies. He is among the top 10 most Read More
Jonas Borchgrevink
Jonas Borchgrevink is the founder of and He is a serial entrepreneur, trader and investor. He shares his own personal journey on // -- Discuss and ask Read More
P.H. Madore
ICO Analyst
P. H. Madore lives in Arkansas with his wife and children. He has covered the cryptocurrency beat over the course of hundreds of articles for Hacked’s sister site, CryptoCoinsNews, as Read More
Mate Csar
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive Read More
Justin O’Connell
Justin O’Connell is a cryptocurrency journalist who works have appeared in the U.S.’s third largest weekly, the San Diego Reader & VICE. // -- Discuss and ask questions in our community Read More
Mati Greenspan
Senior Market Analyst at // -- Discuss and ask questions in our community on Workplace. Don't have an account? Send Jonas Borchgrevink an email -- // Important: Never invest Read More
Rakesh Upadhyay
Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use Read More
Pamela Meropiali
Account Manager
Pamela Meropiali is responsible for users on // -- Discuss and ask questions in our community on Workplace. Don't have an account? Send Jonas Borchgrevink an email -- // Read More
Joseph Young
Joseph Young is a finance and tech journalist & analyst based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering Read More
Bitcoin Bitcoin fell sharply this week.  After touching the 3rd…