The End of Cash As We Know It? Or, Money Doesn’t Talk, It Swears.
(April 24, 2002) Microchip technology is advancing so quickly that it may soon be practicable to actually insert a tiny identifying chip with an antenna into the paper on which currency is printed. This would make “cash” totally scannable, trackable, and identifiable, rather than the anonymous medium of exchange that it is now. Is 'smart' money a stupid idea whose time has come?
Radio-frequency identification tags (RFIDs) are small transmitter gadgets that are used for security and tracking purposes. RFID technology is extensively used today to grant access to secure areas, and track the movements of store inventory, cargo shipments, even livestock. More than just a bar code, these RFIDs actually tag each item and give it a unique electronic ‘fingerprint.’ Moreover, the signals given off by these micro-transmitters can be detected from a considerable distance.
The technology has now advanced to the point that RFIDs can be produced in sizes as small as one-half of a millimeter thin, tiny enough to actually be built into a piece of paper currency.
So is RFID paper money just a futuristic fantasy? No, and in fact the European Central Bank is exploring the idea of imbedding these chips in the larger denomination Euro notes by 2005. According to the Science and Technology section of The Economist newspaper of Feb. 9, 2002 (“Where’s the Smart Money?” page 69-70), at least two chip manufacturers, Philips and Infineon, have signed confidentiality agreements in the area of developing this technology, and Hitachi has been in discussions with some European banknote printers.
The most obvious advantage to RFID banknotes is that they would be the bane of currency counterfeiters everywhere. But, as The Economist reports,
“The ECB is already aware of many new anti-counterfeiting technologies that would be just as robust as, and less expensive than, RFID. If this is the case, the additional benefits of RFID banknotes – such as the greater ease with which cash could be tracked – are the likeliest explanation for why the technology is now attracting serious consideration.”
More troubling are the further ramifications of having cash money that literally broadcasts its whereabouts to the world. Consider the implications: such a technology would allow one to have a map of ‘where the money is,’ for instance, in a house, an entire neighborhood, or in a crowd of people. That’s a powerful tool, whether in the hands of authorized law enforcement personnel, or some other group entirely.
Here in the US, the concept of implanting a ‘tracking’ chip into large-denomination currency is bound to prove irresistible to monetary authorities and technocrats. Now that the technology is available and inexpensive (possibly 25c per application, though that price is bound to fall), the idea will snowball in popularity, for many reasons:
1. Notes with implanted chip/antenna setups would be virtually counterfeit-proof, given a properly programmed ‘wand’ to read the electronic signal that the note would emit.
2. A store or bank could ‘read’ its current cash holding with a wave of that wand, much as a store such as Walmart knows what is selling off its shelves through electronic inventory tracking.
3. Smuggling of large sums of cash across national borders would become more difficult.
4. Stolen money could easily be traced. More temptingly, stolen currency could probably be electronically “devalued” under a system of ‘smart’ money.
5. Tracking suspicious transactions, i.e., those involving large amounts of currency, would be easier if the notes themselves told the tale of when they had last been in circulation. A note’s history of issuance and circulation would follow the note itself – and if long-dormant notes reappeared in commerce, that fact could be instantly known to those with the authority to ‘read’ those notes.
6. With the elimination of anonymous cash, the livelihoods of bookies, drug dealers, and prostitutes would be endangered. If money taken in could be traced back to their customers, these underground businesses would certainly suffer.
7. The “War on Terrorism” would ostensibly be served by making it more difficult for terrorists to move large sums of money anonymously.
8. Untold other benefits will be imagined from a system that actually tracks the movement of cash in real time.
Unfortunately, an idea such as RFID-enhanced currency can build a momentum of its own simply because it is possible, feasible, and “cutting edge.” Often the most enthusiastic constituency for such a brave new idea is the technocrats who will develop the technology itself. And one lesson that we should take from the 1990’s techno-boom was that we should never underestimate the geek ambition to implement something new simply because it can be done.
RFID currency is a bad idea, bad to the bone, because it is a direct challenge to the very concept of cash. Any workable system of cash money is simply one comprised of interchangeable units of value that can be easily traded for goods and services. With cash in your wallet, you can buy what you wish without a thought as to anyone having the ability to trace your transactions. Cash as we know it is easy, convenient, and has always been anonymous.
But paper currency with an implanted microchip and transmitting antenna is another animal entirely, and not just a little bit spooky. Instead of being anonymous, currency with an implanted tracking system becomes a tattletale, broadcasting its whereabouts to the world. Is that what we want our cash to do?
Privacy questions aside, the greater issue here on the monetary front is the goal of the U.S. Treasury to maintain the value of the fiat dollar, a value that today depends entirely upon faith. And faith can be a very delicate thing. That is why the Treasury makes changes in our currency very seldom and always after a great deal of deliberation.
Take for example the first major change in U.S. currency in nearly 70 years, the redesign which occurred in 1996. At that time the Treasury introduced a whole slew of new technology, including a readable magnetic strip, watermarked paper, micro-printing, and ink that shifts in color as the note is held to the light. But for the sake of continuity they retained the same old portraits (though enlarged and moved off-center) and the same black-and-green color scheme that had prevailed since the introduction of our modern size paper money in 1928.
As a result of the 1996 design changes, our paper money today is as ugly as homemade sin and bears a strong resemblance to food stamps. But at least it looks like bona fide, U.S. Treasury-printed food stamps.
But a concept as radical as the introduction of RFIDs in our money, although no doubt tempting as a law enforcement and monetary control tool, may actually threaten the worldwide acceptance of the U.S. paper dollar as “cash” – cash in its traditional sense of being a reliable and, yes, anonymous store of value and medium of exchange.
What’s all this got to do with gold? Well, gold is also cash. Gold is a fungible, changeable, indestructible, and anonymous form of wealth. If the European Central Bank adopts RFID technology in their currency, and the U.S. follows suit, then what is left as the only anonymous form of money in the world?
Only gold remains the original cold, hard cash.