Promised Legal Protection for Cash is a Further Nail in its Coffin

This article was first published in News Uncut and is republished here with the author’s permission. 

The Queen’s Speech, delivered on 10 May 2022, promises legal protection for access to physical cashMoney in physical form such as banknotes and coins. More. The protection claims to be afforded in a new Financial Services and Markets Bill (the ‘Bill’). One might be forgiven for believing this will ensure economically viable and convenient services to withdraw and deposit cash for both consumer and business users. However, the Lobby Pack issued under the Prime Minister’s name [pp. 55-6] blandly states the related objective as ‘Ensuring that people across the UK continue to be able to access their cash with ease.’

This  phrase contains the seeds of the continuing destruction of physical cash, and here’s how:

• It accepts the current, degraded level of service as the benchmark, presupposing that ‘people’ can withdraw their cash with ease now when they cannot
• It ignores the depositing side of the equation
• There is no mention of the UK’s 5.6 million private businesses as cash users
• There is, therefore, no mention of businesses’ need to deposit cash if they are to accept it
• There is no obligation on businesses to accept cash
• There is no acknowledgement of a key advantage for businesses of accepting cash – the business receives the full face valueThe figure or amount written on the banknote or coin which indicates the amount of its economic value. It is usually written in letters and numbers. More of the sale and not the sale value less the very substantial deductions-from-face-value imposed when paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More cards are used. If the business can give out a portion of that cash received as changeThis is the action by which certain banknotes and/or coins are exchanged for the same amount in banknotes/coins of a different face value, or unit value. See Exchange. More or pay suppliers, they experience no bank fees and no deductions – which cannot be permitted.

These deductions, occurring on all payments using either PayPal or a card-carrying one of the recognised brands (Visa, Mastercard and to a lesser extent Amex), are a significant source of income for banks, and they feed an extensive ecosystem of other market actors.

The upswing in online shopping and the reduction in the usage of cash and cheques (brought about as much by banks’ policies as by consumers’ and businesses’ preferences) have dramatically increased this involuntary give-up by businesses of their sales revenues: a contemporary equivalent of coin-clipping.

Ludicrously, a payment using new, digital technology is more expensive: the expense falls on businesses in the first instance as deductions, which are passed on in the form of higher prices to other businesses and consumers. Digital payments are inflationary.

The upshot is that the scope of the protection offered by the Bill will, at best, be the current arrangements after hundreds of bank branches. Automated Teller Machines have been closed after banks have made it extremely difficult for people and businesses to deposit cash and after the Visa and Mastercard ecosystems have established a lock over UK payments for their commercial benefit.

Unfortunately, organisations that purport to represent users’ interests have joined in the applause. Which? has lauded the Bill as a result of its campaigning. In referring to ‘vulnerable groups,’ it has also fallen into a trap laid by the enemies of cash, meaning the proponents of digital payments, including the Payment Systems Regulator or ‘PSR’.

The PSR’s objective is stated in their ‘Access to Cash’ workstream: ‘to support access to cash for UK consumers who need it. This formulation repeats all the exclusions of the Lobby Pack wording and goes a stage further.

The universe of consumers defined as ‘needing access to cash’ can be much lower than the 70 million inhabitants of the UK, can bypass the universe who might ‘want access to cash’ and can ignore those whose view might be that cash is a normal payment methodSee Payment instrument. More, it should be their choice whether to use it or not and when and not up to HMTreasury, the Bank of England, groups of payment technocrats or whoever.

Introducing a test of ‘need’ enables the payment technocrats to narrow the initial definition of the number of people affected and to whittle the number further away via the presentation of their substitute products.

Substitutes are presented in last week’s report of the PSR’s ‘Digital Payments Initiative’. This initiative ‘was commissioned in response to last year’s Access to Cash Working Group’s recommendation for further work to enable digital payments.’

It is meekly accepted that a group charged with protecting access to cash should instead promote digital payments. The substitute products naturally include offerings in which the major card brands are market actors. The main PSR Panel and its sub-committee responsible for the report enjoy heavy representation from the payment cards ecosystem.

Another substitute is the Government’s Central Bank Digital CurrencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More, also known as Britcoin. The Bank of England panels examining Britcoin contain several of the same individuals and even more of the same organisations as sit on the PSR Panel and its sub-committee, as well as numerous other representatives from the payment cards ecosystem.

Britcoin would be a form of ‘stablecoin’: a cryptocurrency whose value is tied to a reference asset, in this case, the UK pound sterlingPound sterling, British currency. More.

The Lobby Pack promises measures in the Bill for ‘the safeSecure container for storing money and valuables, with high resistance to breaking and entering. More adoption of cryptocurrencies,’ meaning the creation of the legal basis for Britcoin.

The background is Rishi Sunak’s determination that the UK become a global crypto-asset hub. He simultaneously called for a Non-Fungible Token (‘NFT’) to be minted. Since then, Bitcoin has dropped 34 per centFraction of a currency representing the hundredth of the unit of account. More from US$47,000 to $31,000.

Investors in the Terra Luna coinA coin is a small, flat, round piece of metal alloy (or combination of metals) used primarily as legal tender. Issued by government, they are standardised in weight and composition and are produced at ‘mints’. More have lost 99 per cent of their moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More. Stablecoins like Tether and Terra USD (the stablecoin sister of Terra Luna) have lost their parity with their reference asset, and NFT volumes have crashed.

Undeterred, the UK payment digitisation show rolls onwards, steered by a technocratic ‘concert party’ consisting of the Chancellor of the Exchequer, HMTreasury, the Bank of England, the PSR, the card-issuing banks, their trade bodies, the members of the broader cards ecosystem, Silicon Valley’s Masters of the Universe and so on.

The attack on physical cash is waged through optically independent and unconnected processes, each predetermined to knock another nail in cash’s coffin, with the panels of pallbearers carefully selected from ‘concert party’ ranks. The Britcoin project is one such process. The PSR’s Digital Payment Initiative is another. The chocolate-fireguard protection in the new Financial Services and Markets Bill is a third.

This post is also available in: