Going cashless?

Nowadays, financial transactions are mostly done online. Use of cash in mainstream financial transactions appears to be on the decline. The argument for a cashless society is gaining ground. At a time when plastic or digital money is on the march, we still see high demand for fresh banknotes especially before Eid festivals. Commercial banks often fail to meet the sudden rise in the demand for new banknotes. As a result, people rush to the informal street corner markets to exchange old, dirty and damaged banknotes for fresh ones. Also, just to have stapled, fresh bundles of banknotes, they go there. Of course, commission is charged against such exchanges depending on the condition of the old notes being exchanged for brand new ones. This surge in the demand for fresh banknotes, especially before Eid-ul-fitr, may have to do with the practice of giving Eidee (a kind of present given in cash) on Eid day by social elders to the younger members of a family or the community. Whatever the reason, it creates considerable pressure on the central as well as the private commercial banks. Perhaps, aghast at this and the street-corner trading of old banknotes for fresh ones, a bank official in a recent article advocated going fully cashless. He drew his inspiration from an initiative that the Bangladesh Bank (BB) had taken in January last year styled 'Cashless Bangladesh, Smart Bangladesh'. However, soon the tempo of the campaign, as the writer himself admitted, died down. But without going further into why that campaign failed to catch the public's imagination, he strongly recommended reviving the BB move and fulfilling the mission of making financial transactions cashless in Bangladesh.

No doubt there are many disadvantages of cash money. As it is a physical object, it lacks the mobility that its virtual version has. Digitally, transfer of money takes place instantaneously. In fact, the advantages of digital money outweigh its disadvantages. And considering its many plus points, even Kristalina Georgieva, Managing Director of the global multilateral lender IMF, in November last year at the 'Singapore FinTech Festival 2023' made a strong case for introducing Central Bank Digital Currencies (CBDCs) to replace cash and advised public sectors so they keep preparing to deploy CBDCs and related payment platforms in the future.

Clearly, the pressure to go cashless is global.

Meanwhile, here in Bangladesh, local people, too, have got used to transacting through credit cards, debit cards and various mobile financial services (MFS) platforms. Even so, the fact remains that, while transacting through such plastic moneys and MFS, etc., the individual doing so also knows that whatever is being transacted digitally is ultimately backed by hard cash deposited with her/his bank account. That means the public still believe cash is the real asset. Unlike digital money, cash is anonymous. So, it will take time before the general public begin to accept, if at all, the fact that their entire savings in the banks are just some non-tangible series of binary digits in the bank's computer server.

Now, suppose, as the IMF MD suggested, our central bank, Bangladesh Bank (BB), issues its own CBDC. How would it be valued? Of course, its value would be linked to our official currency, Taka. Now where will the public deposit their CBDCs? Internationally, a plethora of ideas have been floated on this subject. In the Eastern Caribbean, a system is being tried whereby consumers would hold account with central bank. In China, a version of CBDC is being thought of that would rely on private sector banks for distribution and creation of accounts. The European Central Bank (ECB), on the other hand, among other options, is thinking of a Digital euro. BB may have its own ideas.

Storage and transaction of digital money take place online. Every step of the transaction can be tracked. The online accounts lack privacy. How the account holder handles her/his money can be watched by interested quarters and be discriminated against. The digitally maintained account can be hacked and your money stolen without leaving a trace.

Worse, a cashless economy will be a totally surveilled one, with no place to hide!

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