With a Cashless Society Politicians Can Close Down Legal Industries They Dislike

by Tim Sloane 0

This article in The Atlantic presents a compelling argument that a cashless society enables those in power to de-fund a business that is not politically correct as was done with Operation Choke Point:

“In a cashless society, the cash has been converted into numbers, into signals, into electronic currents. In short: Information replaces cash.

Information is lightning-quick. It crosses cities, states, and national borders in the twinkle of an eye. It passes through many kinds of devices, flowing from phone to phone, and computer to computer, rather than being sealed away in those silent marble temples we used to call banks. Information never jangles uncomfortably in your pocket.

But wherever information gathers and flows, two predators follow closely behind it: censorship and surveillance. The case of digital money is no exception. Where money becomes a series of signals, it can be censored; where money becomes information, it will inform on you.

In the spring of 2014, the Department of Justice began to come under fire for Operation Choke Point, an initiative aimed at discouraging or shutting down exploitative payday lenders. The ends were, on the face of it, benign, but the means were highly dubious.
At the time, the need for consumer protection was painfully obvious, but payday lending was and is still legal. So the DOJ got creative, and asked banks and payment processors to comply with government policies, and proactively police “high-risk” activity. Banks were asked to voluntarily shut down the kinds of merchant activities that government bureaucrats described as suspicious. The price of resistance was an active investigation by the Department of Justice. By December 2013, the DOJ had issued fifty subpoenas to banks and payment processors.

The most vociferous objections to Operation Choke Point came from gun-rights activists, as the firearms and ammunitions industry were labeled “high-risk.” But guns were only one industry among a bizarre miscellany that had been targeted. Tobacco sales, telemarketing, pornography, escort services, dating services, online gambling, coin dealers, cable-box descramblers, and “racist materials” were all explicitly listed on the Federal Deposit Insurance Corporation (FDIC) website as “merchant categories that have been associated with high-risk activity.”

Critics of Operation Choke Point saw the initiative as a policing of vice, rather than a consumer protection campaign. Many of the targeted industries—like pornography—could be seen as morally unsavory. And in many cases—as with guns—such moral judgments were highly politicized. One pundit wrote, “[W]hile abortion clinics and environmental groups are probably safe under the Obama administration, if this sort of thing stands, they will be vulnerable to the same tactics if a different administration adopts this same thuggish approach toward the businesses that it dislikes.”

For many conservatives, Operation Choke Point was a new liberal offensive in the culture war, a backhanded attack on the Second Amendment. There was never any evidence that guns were the primary focus of Operation Choke Point, but the outrage continued, fueled by an alarming number of stories of firearms vendors being cut off by credit-card companies or suddenly having their bank accounts closed.”

There are many additional issues discussed in this article which makes it a compelling read, especially the research indicating that those with low income will be the most negatively impacted group if cash is eliminated and how the governments “concerns” trickled down into aggressive rules excluding entire industries from accepting payments.

But most disconcerting to this reader was the broader implication that a cryptocurrency, if controlled by the government, would enable an even larger opportunity for monitoring and controlling behavior. The article demonstrates how the government, through banking regulations and the card networks, has already bypassed the legislative process and used its power to enforce a political belief system that closed down legal businesses. Understanding and managing this governmental overreach must be better managed today and will become even more critical as more and more payments become electronic.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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