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Author Topic: A Shift Toward Digital Currency  (Read 2855 times)

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« on: April 06, 2012, 12:13:24 AM »
A Shift Toward Digital Currency

(Jerry Brito is a senior research fellow at the Mercatus Center at George Mason University and director of its Technology Policy Program. He also serves as an adjunct professor of law at George Mason.)

April 4, 2012

Canada is eliminating the penny, but not the cent: digitally, consumers can still pay to the cent, for instance charging $1.03 to a credit card rather than paying $1.05 in cash. It's almost inevitable that digital money will soon replace not just the penny, but all physical money — in the U.S., Canada and elsewhere. Moving away from paper notes and coins and toward a digital currency is a no-brainer, at least when it comes to cost and efficiency. But when it comes to privacy and freedom, cash can't be beat. We must ensure that we protect our civil liberties by preserving some untraceable payment method.

As we move toward being a cashless society, we must defend consumers' privacy and limit the power of government and businesses.

Cash is anonymous, which helps keep one's purchases private. Cash is also difficult to control: a $100 bill never gets "declined." In a cashless world, however, not only would it be easier for governments and corporations to spy on our transactions, but also they would gain greater control over which transactions to allow at all.

Soon after Wikileaks began releasing its trove of State Department diplomatic cables last year, payment processors like Visa, MasterCard and PayPal came under intense political pressure to cease doing business with the transparency group. The companies acquiesced, and Wikileaks has been unable to easily accept donations ever since. This has largely hobbled the organization.

Imagine if the only way to support unpopular causes was with easily controlled e-money. Certain transactions could be disallowed by law, political pressure or corporate fiat, and anonymous giving would be impossible. Each of your transactions would be tied to your identity. One could not make a purchase at a gay bookstore or a pregnancy clinic without knowing that somewhere there's a permanent record of the transaction. And there might not be any transaction that couldn't be subpoenaed in a divorce or other legal proceeding.

Some consumers worry about online tracking by marketers. They should be just as worried about "Know Your Customer" laws that today require banks and other financial institutions to report to the government what they believe are "suspicious" transactions — a flexible standard.

If we do move toward a digital currency, we should ensure that we retain some type of digital cash that is anonymous — or at least pseudonymous — and that is not tied to a financial intermediary that can control transactions. The nascent digital currency Bitcoin has demonstrated that such e-cash is possible. Bitcoin employs no user-identifiable accounts, relying instead on public key cryptography, so there is no way to know who gave money to whom. And because no intermediaries are needed for Bitcoin transactions, governments have no intermediaries to regulate.

"Your keys, your Bitcoin. Not your keys, not your Bitcoin." (Andreas Antonopoulos)
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Re: A Shift Toward Digital Currency
« Reply #1 on: April 06, 2012, 07:16:13 AM »
"a $100 bill never gets "declined." "

To bad that's not true... a lot of businesses refuse to take 100$ bills >:(


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