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

Categories : Cash is a public good, Cash is available to all users, Cash is the first step of financial inclusion
June 9, 2022
Tags : Acceptance of cash, Access to cash, Regulation, UK
The Queen's Speech, delivered on 10 May 2022, promises legal protection for access to physical cash. But scratch beneath the surface and the promise contains the seeds of the continuing destruction of physical cash.
Bob Lyddon

Lyddon Consulting

This post is also available in: Spanish

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 cash. 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:

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 method, 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 Currency, 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 sterling.

The Lobby Pack promises measures in the Bill for ‘the safe 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 cent from US$47,000 to $31,000.

Investors in the Terra Luna coin have lost 99 per cent of their money. 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: Spanish