The following is a summary of our recent FS Insider podcast, which can be accessed on our site here.
With India’s recent move toward a cashless society, it’s becoming increasingly clear that a worldwide effort is underway to move away from physical currency, according to Norbert Haering, Ph.D., writer for Germany’s leading business newspaper, Handelsblatt, and author of The Abolition of Cash and the Consequences.
This time on FS Insider, we spoke with Haering to get his take on India’s transition, and those who would like to see cash completely eliminated to be replaced by digitized payments.
Who’s Behind the Move in India?
Indian Prime Minister Narendra Modi’s move to abolish around 80 percent of Rupee bank notes last year stirred a lot of controversy and was a major surprise to the Indian public and others.
That being said, “it didn’t come out of the blue like it did for the Indian people,” nor was it simply an idea that was generated by Modi or the Indian government, Haering stated. “It was prepared with foreign help.” Here's a clip:
There was a partnership to promote the plan with the Finance Ministry in India between groups that largely reside in the US, with India targeted for specific reasons as part of a broader experiment.
“You couldn’t think of doing something like this in Europe,” he said. “You need a government that is very authoritarian and has a lot of support...that would be ready to do something like that to their people. Not many democratically elected governments would do that, or would be able to do that, without being swept away,” said Haering.
The Better Than Cash Alliance
The U.S. government, credit card companies, and large U.S. banking firms are a big driver in the move towards a cashless society, Haering explained. One such group involved in the whole affair is the Better Than Cash Alliance.
As stated on their website, "The Alliance is funded by the Bill & Melinda Gates Foundation, Citi Foundation, Ford Foundation, MasterCard, Omidyar Network, United States Agency for International Development, and Visa Inc." with the express goal to "accelerate the transition from cash to digital payments globally."
The stated reason for this transition is to reduce poverty by way of “financial inclusion,″ a common catchphrase in the banking industry, which means “that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way,” the World Bank states.
To Haering, however, this is just a pretense and he believes that cash is actually the most inclusive since it does not discriminate between those who hold it nor rely on technology for its use.
From Fiat to Blockchain
One idea that’s gaining large momentum is to digitize national currencies by using the blockchain, the breakthrough technology underpinning Bitcoin.
In an official white paper released January 2017, an organization established by the Reserve Bank of India provided an extensive roadmap for the implementation of blockchain tech across the financial and banking industry. They write:
“In a bid to evolve towards a cashless society, many central banks around the globe including Canada, England, Sweden, and Netherlands have started exploring the use of BCT [blockchain technology] for digitizing their currency, and many more are converging to the idea. From a technological perspective, we feel that BCT has matured enough and there is sufficient awareness among the stakeholders which makes this an appropriate time for initiating suitable efforts towards digitizing the Indian Rupee through BCT.”
Not so long ago, Haering noted, going cashless was more of a fringe topic that didn't seem very realistic to many. However, things are moving much quicker than he anticipated.
“In a couple of years, it really could become quite difficult to use cash in the way you did 5 years ago,” especially if you are labeled as a criminal for doing so, said Haering.
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