A mandate on cash? Evidence and opinion for UK Treasury Committee

• Boudica Cybersecurity
• Company Number 15232485
• Registered location: Christchurch, Dorset.
• Contact: info@boudicasecurity.com
• Website: https://boudicasecurity.com

Based on our work in cyber-security we, the below signatories, submit this evidence document from a systems-theoretical and digital-security perspective. We address multiple concerns we have regarding the erosion of cash usage in the British economy, namely that any loss of widespread acceptance of cash will:

• adversely affect education
• put vulnerable persons at more risk
• damage national resilience
• incur presently hidden future costs

Cash is a lubricant and economic enabler. It lets us give tips to waiters and musicians, allows relations between neighbours in exchanging anything from a pint of milk to a second hand bicycle. It facilitates relations between spouses and between children, for example; paying for cake at a school fete. Ordinary citizens do not carry around electronic Point Of Sale (POS) terminals in order to interact, nor should they need to. For many reasons, including mental heath, a significant cohort now eschew "smartphones". Reliance on non-electronic technologies undergirds societal resilience and frictionless relations.

Digital economies are now understood as extremely sensitive to knock-on and runaway effects known as "Network Effects". We assert that failure to protect cash usage in a significant proportion of domains will lead to total collapse in usage in all domains. There is evidence from other systems of how this happens. We are therefore confident that even if compelling arguments can be given for areas where cash should not be mandated that should not be taken as a green light to neglect the primacy of cash.

Under conditions of efficient supply-chains, modern society is three days from starvation. The presence of cash in an economy is a buffer and safety net. It allows commerce to flywheel (keep running) during outages. Failure of digital systems is commonplace and increasing. Cyber-crime, cyber-warfare and an increasingly dangerous international security situation must be considered. Neglecting cash will quickly cause manual apparatus of exchange to fall into disrepair and erode national security. Cash capability must be considered a national security asset.

Tangible currency is a cornerstone of education from the primary level up. Teaching mathematics, home economics and social skills requires a foundation of practical skills, like how to divide money, correctly count change, collect sponsorship and give to charity. If shops do not accept cash young people cannot exercise these skills. I was shocked to hear another parent sincerely ask a teacher "Why do we teach kids about maths and money when these days they just tap a card?"

Charities themselves have an obvious stake in protecting viable cash currency. The era of "chuggers" attempting to get passers-by to sign up to direct bank payments has passed because it was a financial disaster for charities and arguably immoral. Regardless of potential fraud, street collection in cash remains a core activity for most charities.

Notwithstanding educational impact, children need to be able to handle money. Weekly pocket money and a piggy bank are how each generation learns financial responsibility needed for life. Contactless Point of Sale systems (POS) remove all sense of value not just for children but the adults they become. Cashless systems encourage irresponsibility. Reducing debt and hardship is as much about good education and careful spending as anything.

Legible and fluid finances are important to stable family life, but an oft overlooked truth is that autonomy and privacy is also essential. Women in coercive relationships often have no control over their finances. If they become victims of domestic violence cash is a lifeline of autonomy. Hostility toward financial anonymity often justified by concerns over large-scale tax evasion and criminal activity is ridiculous when extended to everyday life of the majority of law-abiding citizens and sums of less than a few thousand pounds. Some say, "Why not use Direct Debit?", but that's just not practical for arbitrary, one-off purchases. Not everything is amenable to subscription models.

There is a great deal of misunderstanding about online security captured by the question "security for who?". Privacy and anonymity are an essential part of security. In many instances legibility becomes insecurity since increasingly attacks are not on systems, end-points or credentials but are psychological "social engineering". These attacks are greatly exacerbated by "AI" (machine learning combined with big data sets). There are several designs of electronic cash (for example Taler) that preserve customer anonymity but make merchants legible for tax purposes. We expect to see cash evolve toward these formats. Face-to-face financial services actually increase security. Fraud is much more difficult where transactions require physical presence, and bank branches are secured.

When we talk of mandating cash what we presume are familiar notes and coins issued by the Bank Of England. This is often cast in opposition to "technology". Of course we hope these will remain the primary form of cash. But cash is a technology which is itself evolving in many ways. Paper can now be fabricated into all manner of active forms via advanced printing and eInk technology. This can include 'active' value notes, and physical creations more resistant to forgery and fraud even than digital systems. The essential properties of cash are complex and combine portability, anonymity, durability, recognisability, stability, fungibility and so on. We advise that any government considering the future of cash should consider the principle of cash and its acceptance and not focus only on its existing forms.

An argument is often made against cash that it is expensive to handle. However, all systems carry a cost. Electronic systems rely on data centres with a significant environmental carbon impact. Particularly, proof-of-work and high security cryptography is computationally intensive. That cost is presently hidden, being absorbed by the main system operators like Mastercard and Visa. These data centres have to be run whether or not people are spending, and their costs are continuous, whereas for passive cash there is no energy cost while it sits idle in people's pockets. If merchants obtain a larger slice of the payments market and do not have to compete with cash they will doubtless increase charges. We advise that any decision informed by cost includes a mature, impartial and full-spectrum analysis of running costs now and in the future.

Digital money takes value out of an economy not returned in the form of social benefits. Payment processing charges as high as three percent are extracted by US corporations to offshore locations where we cannot levy corporation tax and so leaves the UK economy. In theory, there could be a UK Treasury of digital currency which recirculated transaction costs into our economy. In reality we have PayPal, Stripe, Mastercard, and Visa, none of which are British.

Although large deposits can be tracked for law-enforcement reasons through Know Your Customer (KYC) data sharing, the claim that all digital transactions are easily visible is false. The reality is that digital money is harder to track because it has no "speed limit" and can quickly transform into cryptocurrencies and other holding instruments. As cryptocurrency that money is not available to invest in British employers and start-ups. And of course it is a source of venture capital for all kinds of crime, including financial crime. The anti-cash brigade doesn't like to talk about that.

During the pandemic much was made of supposed biological hazards of cash as a potential disease vector. Digital payment methods made great gains in this period, helped somewhat by fear and misinformation. With COVID it transpired that the virus was borne in air rather than surfaces, although one should not rule out possible hazards for a different pathogen. Research has shown that coins at least have a low risk of transmission. In weighing this argument it should be noted that touch screens and near-field technology have similar proximity and contact hazards and that cash is not especially problematic.

We are grateful for the opportunity to present evidence and advice to the parliamentary committee. As experts in the area of computer systems and security we urge great caution in accepting prima facie that allowing cash usage to lapse is safe.

We accept that it is hard to find solid scientific evidence for mandating cash acceptance that does not rest on speculation. However, we strongly urge the committee to consider the lack of evidence and preponderance of specious evidence used in arguments against cash money by neophytes and loud voices within the payments industry.

A "cashless" society is one where direct monetary relations between ordinary people do not exist, because all transactions are intermediated by a corporation. This alters fundamental social structures and is an attack on psychological and social security.

Given our familiarity with how precarious digital systems are, as with paper ballot voting systems we believe it would be foolish to allow the demise of a 5000 year-old technology in lieu of one that is less than 60 years old and essentially unproven in the bigger picture.

Sincerely,

A. Farnell, E. Nevard, H. Plews, K. Brown (Novenber 2024)

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