Simon Youel

August 2 2022

With so many vested interests wrestling for control over the future of money, it’s hard to know who to listen to. While crypto HODLers will try to convince you whatever ‘coin’ they’ve invested in will become the basis of the global economy, incumbent payment providers (from banks and card companies to fintech giants like PayPal) also go to great efforts to convince us that cash is an unnecessary relic of the past, and that a cashless society is inevitable and even ‘liberating’.


Brett Scott’s latest book, Cloudmoney, provides an essential guide to the actors attempting to displace cash and the wider social forces driving them, while putting forward a much needed defence of humble notes and coins.


Scott is perhaps uniquely placed to offer a balanced overview of the competing ‘tribes’ vying for control over the money system. He has spent time in the skyscrapers of corporate finance as a trader (an experienced which inspired his first book), and rubbed shoulders with technocrats at the UN, EU and IMF. But he has also been in the groundfloor of monetary rebellions against these institutions. He was an early adopter of Bitcoin, and like many of us, used it as a means of payment before it devolved into a speculative asset. At heart he is an anthropologist whose instinct is to investigate and ‘jam’ seemingly disparate cultures.

In defence of cash

As a writer, Scott excels in constructing concepts and metaphors that help readers navigate the complex world of money and finance. There are compelling arguments in his comparison between the cash system and other analogue infrastructures we otherwise wouldn’t want to disappear, such as bike lanes running parallel to roads and emergency staircases in skyscrapers.


Like the bicycle of Scott’s analogy, cash is a technology that, despite its analogue construction, has benefits which ‘high tech’ alternatives are unable to match. When you use a card to pay the cashier standing opposite you in a shop, this seemingly simple process requires the involvement of several layers of intermediaries (including card companies, point of sale terminal providers, banks) interacting through datacentres in different parts of the world, all extracting fees and harvesting data from the transaction. Meanwhile simply handing over notes and coins allows the instant final settlement of a transaction peer-to-peer, with no fees or user data being generated.


Yet the propaganda war on cash has convinced many of us that these publicly issued forms of money are inefficient relics of the past. It may therefore come as a surprise to many that cash remains a much cheaper means of payment than card, as data from the Bank for International Settlement shows. Even in the more ‘cashless’ European countries, including the UK, the marginal cost of a transaction is between 50% to 150% higher for cards than cash. The majority of the cost for cards is the service charges paid to payment providers.

Even in the more ‘cashless’ European countries, including the UK, the marginal cost of a transaction is between 50% to 150% higher for cards than cash. The majority of the cost for cards is the service charges paid to payment providers.

These fees are paid by merchants and usually hidden from the user in countries like the UK where businesses are no longer allowed to charge for card use, but the costs are passed onto customers through higher prices. People using cash therefore find themselves subsidising card payments.


The high costs of card payments are not because digital payments are inherently any less efficient than cash. It is because it is far harder to extract economic rent from cash.


Despite technological advances and greater economies of scale, the cost of card payments has failed to come down, as would be expected. The reason for this is high levels of market concentration in payments, with providers like Visa and Mastercard dominating. Mastercard is currently facing a £10bn class action lawsuit, which argues that British adults are owed hundreds of pounds for footing the bill for the companies’ excessive fees through higher prices.


Perhaps the main reason so many people aren’t concerned with the decline of cash is because it seems more of a question of changing technological preferences than power.


Few may realise it, but the money in your bank account is not simply a digital equivalent to physical cash. While notes and coins are public forms of money issued by the state, bank deposits are private forms of money issued by commercial banks when they make loans.


Convertibility with risk-free public money is what underpins the acceptability of these private forms of money. As it is issued by the state which cannot go bust, a banknote will be accepted as a means of settling transactions. But without access to a digital form of public money, we have to rely on commercial banks, who do have access to publicly issued central bank reserves through their accounts at the Bank of England to make payments. This reliance gives banks huge amounts of power. They are able to decide where new money goes in the economy through their lending, but are bailed out (as we saw in 2008) when their lending goes sour, as we need them to make payments.


But as Scott lays out, it is not just banks we are handing power over to in a cashless society. A whole host of card companies and tech giants are all vying to get their cut from the privatised payments network.

The gentrification of payments

Another useful concept expounded by Scott is the ‘gentrification of payments’, with gentrification being the leading edge of ‘corporate seep’ – “the process by which previously informal and direct peer-to-peer economic relationships are replaced with institutionally mediated ones.”


The role the cash system has historically played as a free public payments option, and its universal accessibility, means that cash has naturally been a ‘working class’ form of money.


Cash usage cannot be dismissed as simply a question of geography or broad ‘demographics’, but also an issue of class. Anyone who thinks cash is simply a relic for elderly populations in rural areas, but not for a ‘digitally native’ city like London hasn’t been paying enough attention. While it may be a hackneyed cliché to draw upon the archetypal ‘hipster cafe’ as a symbol of gentrification, they too easily illustrate Scott’s point. Walking down my local high street on London’s Green Lanes it is hard not to notice the contrast between the moneyed cafes charging above £3 for a coffee with their signs promoting cashless payments, and the Turkish butchers and kebab shops with their signs declaring ‘cash only’. As Scott puts it, “The rise of digital payments runs parallel to the process of gentrification, in which ‘rough’ shops with an informal ethos are displaced by boutiques that will pave the way for standardised chains.”


We know that cash usage is lowest among those with higher incomes and education. Institutions which are going cashless are making it clear who they are there to cater for, and showing that they either want to actively exclude or just don’t think about the types of people from backgrounds different to their own who use cash.


Scott makes an important stand against the ‘financial inclusion’ narrative, that cash users need to be rescued from their inertia and herded into digital systems. Should we reject such paternalism and instead celebrate the refusal not to move efficiently with the rhythms of capital?


Scott’s goal with Cloudmoney is not to romanticise cash itself, but to defend it as a necessary source of friction slowing down the otherwise relentless expansion of financialised corporate capitalism and its drive to turn all social relations into an opportunity to extract rent.


Cash allows us to carve out spaces of social autonomy, where we can have organic economic relationships without relying on systems beyond our control and the permission of middlemen.The spread of non-cash payments seeks to place intermediaries in the way of human relationships not only to extract immediate profit, but to capture leverage points for further power. Without cash, any subversive social events – be it an ‘underground’ rave or a fundraiser for disruptive climate activism – cannot take place without the involvement of Visa, Mastercard, Worldpay, Barclays or HSBC.

The case for true digital cash

It can be tempting to look to cryptocurrencies as a means of fighting back against a payment system built on the shoulders of big banks. Indeed, Bitcoin was originally conceived as a ‘a peer-to-peer electronic cash system’. But as Scott details, a war between those wanting the currency to stay as ‘digital cash’ and those who wanted it to become ‘digital gold’ saw the digital goldbugs win out, and Bitcoin, like gold, has become more of a speculative asset than means of payment. But the reason cryptocurrencies are unlikely to displace ‘fiat’ currencies like the dollar or the pound is because of their inability to carry out what is probably the most important function of money, as a ‘means of account’. To put it simply, very few prices are denominated in cryptocurrencies. As Scott reveals through the concept of countertrade, even when things appear to be priced in Bitcoin, they are usually actually priced in fiat currencies.


The main reason we use fiat currencies is simply because this is what the goods and services we require are priced in, arguably driven by the fact states demand payment of taxes in these currencies. However what would happen if global corporations with significant price-setting powers started encouraging in payment in their own form of money? And what if they could take advantage of powerful ‘network effects’ to scale up rapidly? This is a prospect that has reared its head through corporate ‘stablecoins’, such as Facebook’s now defunct Diem (formerly Libra) project.


Concerned by the risk of global corporations gaining complete control of the monetary system, states across the world, from Sweden to China, are accelerating efforts to introduce a new form of public money, in the shape of central bank digital currency (CBDC). A CBDC could have transformative potential at both the more ‘micro’ level – such as bringing down the costs of payments and increasing financial inclusion  – and the more macro – such as facilitating direct payments from the state to households (like a UBI) as well as the socialisation of investment.


Scott however appears more sceptical, arguing that a CBDC would suffer from the same issues he’s illustrated for private forms of digital money, such as surveillance and censorship but from the state. While he does concede that CBDCs could be designed in a way which make them more like ‘digital cash’, little time is spent exploring the efforts to build a genuine digital equivalent which shares all the same benefits of notes and coins his book extols.


While not technically a CBDC (it would be issued by the US Treasury rather than the central bank), the Electronic Currency and Secure Hardware (ECASH) Act being introduced to US Congress provides a model to be replicated. Like notes and coins, ECASH would be a bearer instrument, with ownership validated by possession, rather than the verification of identity. This means that like physical cash, it requires no ID or account to use, allowing it to be used peer-to-peer without any intermediary to authorise the transaction (and therefore no fees), and without generating user data. The secured hardware means that it can even be used offline.


As Cloudmoney illustrates so well, first we must protect cash to defend ourselves from corporate capitalism’s relentless advance, but we should also be developing new weapons which weaken big tech and big finance’s sources of power. Whether physical or digital, we need cash.

Simon Youel is Head of Policy and Advocacy at Positive Money, a research and campaign organisation working towards a money and banking system which supports a fairer, more democratic and sustainable economy.