30 August 2014

Forget bitcoin, let's ban hard cash urges US congressman

07 March 2014  |  4826 views  |  6 $100

Let's hear it for the eminently sensible Colorado Congressman Jared Polis, who has written to US financial regulators demanding the abolition of hard cash because of its anonymity and use in illicit activities.

Polis' letter mimics a well-trailed missive dispatched last week by West Virginia senator Joe Manchin to a host of regulatory bodies calling for an outright ban on bitcoin because of, well, its anonymity and use in illicit activities.

As Polis correctly points out: "Printed pieces of paper can fit in a person's pocket and can be given to another person without any government oversight."

Much like their virtual currency counterparts, this means that dollar bills can be used for "anonymous and irreversible transactions", and are likewise susceptible to large-scale forgery, fraud and theft.

"The clear use of dollar bills for transacting in illegal goods, anonymous transactions, tax fraud, and services or speculative gambling make me wary of their use," concludes Polis. "Before the United States gets too far behind the curve on this important topic, I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans."

March 5, 2014

Dear Secretary Lew, Chairwoman Yellen, Comptroller Curry, Acting Chairman Wetjen, Chairman Gruenberg, Chairwoman White:

I write today to express my concerns about United States dollar bills. The exchange of dollar bills, including high denomination bills, is currently unregulated and has allowed users to participate in illicit activity, while also being highly subject to forgery, theft, and loss. For the reasons outlined below, I urge regulators to take immediate and appropriate action to limit the use of dollar bills.

By way of background, a physical dollar bill is a printed version of a dollar note issued by the Federal Reserve and backed by the ephemeral "full faith and credit" of the United States. Dollar bills have gained notoriety in relation to illegal transactions; suitcases full of dollars used for illegal transactions were recently featured in popular movies such as American Hustle and Dallas Buyers Club, as well as the gangster classic, Scarface, among others. Dollar bills are present in nearly all major drug busts in the United States and many abroad. According to the U.S. Department of Justice study, "Crime in the United States," more than $1 billion in cash was stolen in 2012, of which less than 3% was recovered. The United States' Dollar was present by the truck load in Saddam Hussein's compound, by the carload when Noriega was arrested for drug trafficking, and by the suitcase full in the Watergate case.

Unlike digital currencies, which are carbon neutral allowing us to breathe cleaner air, each dollar bill is manufactured from virgin materials like cotton and linen, which go through extensive treatment and processing. Last year, the Federal Reserve had to destroy $3 billion worth of $100 bills after a "printing error." Certainly this cannot be the greenest currency.

Printed pieces of paper can fit in a person's pocket and can be given to another person without any government oversight. Dollar bills are not only a store of value but also a method for transferring that value. This also means that dollar bills allow for anonymous and irreversible transactions.

The very features of dollar bills, such as anonymous transactions, have created ubiquitous uses from drug purchases, to hit men, to prostitutes, as dollar bills are attractive to criminals who are able to disguise their actions from law enforcement. Due to the dollar bills' anonymity, the dollar bill market has been extremely susceptible to forgers, tax fraud, criminal cartels, and armed robbers stealing millions of dollars from their legitimate owners. Anonymity, combined with a dollar bills' ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions.

Many of our foreign counterparts already understand the wide range of problems that physical currencies can have. Many physical currencies have enormous price fluctuations, and even experience deflation. 20 years ago Brazil had an inflation rate of 6281%. In 4 years (2001 to 2005), the Turkish Lira went from 1,650,000: $1 to 1.29 to $1. In 2009, Zimbabwe discontinued it's dollar. Before it was eliminated, the Zimbabwe dollar was the least valuable currency in the world and their central bank even issued a $100 trillion dollar banknote. A person would starve on a billion Zimbabwe dollars and it took an entire wheelbarrow full of $100 billion dollars in notes to purchase a loaf of bread.

The clear use of dollar bills for transacting in illegal goods, anonymous transactions, tax fraud, and services or speculative gambling make me wary of their use. Before the United States gets too far behind the curve on this important topic, I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.

Sincerely,

Jared Polis
Member of Congress

Comments: (6)

Neil Burton - Earthport - London | 07 March, 2014, 12:47

He gets my vote!

Here's how to clean up the cash...

christopher williams - rtpay inc - delray beach | 07 March, 2014, 12:54

Pehaps a little extreme - but a great idea! I would suggest that there is a genuine reason to follow much of this argument and withdraw all notes over $10, or maybe over $5. The ability of criminals to conduct many transactions in cash with what would become quite large sacks of notes would be interesting. That includes the tax evaders (plumbers, gardeners, cleaners) who want to get paid in cash! 

It would also be interesting to see how much of the currently issued larger bills came in to be converted to electronic money, or go into bank accounts - or, I suppose, changed into $5 bills.

Of course, while the EU has a 500 euro note (so $700 in value) we may just see that take over even more for the criminals.

Going to happen? Not a hope; way to simple. But what if it did? Lower taxes for honest people??

 

Melanie Friedrichs - Andera - Providence | 07 March, 2014, 16:55

My first reaction is to point out that this measure would likely have adverse effects on the poor... the low-income economy is very much a hard cash economy. The cost of switching would be disproportionately be borne by those who can least afford it. 

Paul Penrose - Finextra - London | 07 March, 2014, 17:10

Folks, we're prety sure the letter was a tongue-in-cheek ripsote to the anti-bitcoin brigade. Wouldn't take it too seriously

Henry Young - TS-Associates plc - London | 11 March, 2014, 02:47

Refreshing to see an American display a sense of very British irony !

Neil Burton - Earthport - London | 11 March, 2014, 09:43

Paul, I agree, and all the better for that!

But there is a serious side to it - we (quite rightly) go to a great deal of effort and cost to make the formal financial system inaccessible to bad people and bad transactions, whilst perhaps paying less attention to alternative forms of transfer of value. And as we know, there are unintended consequences, as illustrated by the Dahabshiil - Somalia issue - twice debated in the House of Commons, a committee set up, but little material progress so far. King's College London is about to kick off some research into whether the current model is progressive, sustainable etc. I will seek to report back here on Finextra.

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