March 26, 2025 | Read Online

_{Brought to you by:}

"Faith in democracy and faith in markets go hand in hand."

— Bob Rubin

Cash (and crypto) is the back-up generator of finance

A couple of years ago I started paying for things with cash whenever I could.

For one thing, it saves on tips.

In all those counter interactions that never used to involve tipping, it's embarrassing to type in a custom amount below the 20% default minimum on a big touchscreen that everyone behind you can see — but no one will add up the change you drop in the tip jar (if there even is one).

More importantly, it keeps the cash economy alive.

If some critical mass of customers don't pay with cash, retailers won't bother with the hassle of accepting it.

(Anecdotal evidence suggests the threshold is about 10%.)

That matters because if retailers stop accepting cash, we'll lose a major source of privacy.

Most take it for granted that we should have some degree of financial privacy, but the fact we have any at all is an accidental relic of physical money — governments have never cared about our privacy, they just couldn't do anything about it while payments were made with paper bills and metallic coins.

So, to preserve financial privacy for everyone, at least 10% of us will have to bravely forgo credit card points and pay with cash.

It's been a losing battle.

Retailers are increasingly reluctant to deal with the cost and hassle of handling cash and also the security risk of holding and transporting it.

Governments have sought to reduce crime and tax evasion by shrinking the cash-based economy and promoting cashless payments.

Sweden has been leading the way — the first country to introduce banknotes in Europe (pictured above) has been racing to become the first to eliminate them.

In 2018, a Riksbank official predicted that Sweden would be cashless in three to five years (not because it would be banned, but because so few people would use it that it would become practically useless).

An anti-cash crusader, Björn Ulvaeus, has campaigned for years to accelerate this trend — eliminating cash from the economy would be the "biggest crime-preventing scheme ever," he reasons.

(Fun fact: Ulvaeus is a little better known as the clean-shaven guy from Abba.)

His argument has been well received: As recently as 2022, an investment bank reported that "Sweden's economy is on course to become fully digital by March 2023."

It nearly happened: As a percentage of GDP, Sweden and Norway have the lowest amount of cash in circulation in the world.

But they never quite got to zero.

As of recently, their respective governments have been glad they didn't.

In March 2024, the Riksbank noted in its annual payments report that "as a general rule, merchants selling essential goods must be obliged to accept cash, both to ensure that everyone can pay and to be able to cope with a peacetime crisis situation or state of heightened alert." (Emphasis added.)

In November, Sweden's Civil Contingencies Agency mailed a brochure to every Swedish home entitled In case of crisis or war, in which the government advised people to use cash regularly so that cash payments will remain available in an emergency.

There was no mention of us cash-paying heroes in that brochure, but Norway's Justice and Emergencies Minister Emilie Mehl has acknowledged our hard work: "If no one pays with cash and no one accepts cash, cash will no longer be a real emergency solution once the crisis is upon us."

European governments increasingly worry that a crisis may soon be upon us.

Reuters reported this week that trust in the US government is now so low that Europe's bankers are no longer sure they can rely on the Federal Reserve to provide US dollars via swap lines in a financial crisis — a central banker's worst nightmare.

Because the global financial system is so intertwined with the US one, the defining feature of every modern financial crisis is a shortage of US dollars.

So, pulling the swap lines that provide them in a crisis would be like imposing a financial death sentence on Europe's economy.

That is no longer unthinkable.

Amidst the financial crisis of 2008, then-Treasury Secretary Tim Geithner explained to the FOMC why it should extend swap lines to Europe: "The privilege of being the reserve currency of the world comes with some responsibilities."

It's not clear the current administration would be interested in fulfilling those responsibilities.

The Trump administration has used tariffs as diplomatic leverage and made it clear that everything is transactional now — we'll guarantee your security only if you buy our century bonds, for example.

This weaponization of finance has been a bipartisan effort: Former President Biden had already turned the global payments system into a diplomatic weapon, in addition to imposing over 7,000 financial sanctions on adversaries like Russia.

7,000 is probably too many.

Financial war is better than kinetic war, but if the US overdoes it, countries will prevent us from using it by opting out of the US-dominated global financial system.

One alternative is to opt-in to a local financial system that can reliably fall back on peer-to-peer cash in an emergency.

You can see why countries might: If the president of the United States orders Visa and Mastercard to stop processing payments in your country, cash might be your only way to buy things.

Or crypto!

The weaponization of finance makes peer-to-peer payment systems — be they cash or crypto — more interesting, more important and more worthwhile.

Keep the change

Björn Ulvaeus doesn't expect an answer when he challenges people "to come up with reasons to keep cash that outweigh the enormous benefits of getting rid of it."

But it's not that hard.

Cash is the backup generator of payments, always available in case of emergency.

Cash offers financial privacy in an age when every digital transaction can be tracked and controlled.

Cash is a check on the power of both state and corporate actors.

Cash isn't subject to sanctions or geopolitics in an age when international bank wires and global payment networks have been politically weaponized.

Cash is a local medium of exchange.

As the world grows increasingly fragmented, cash (and maybe crypto) will play a greater role in preserving national and individual sovereignty alike.

Also, it saves on tips.

— Byron Gilliam

Brought to you by:

DTCC ComposerX™ is the complete solution for financial institutions, providing an end-to-end platform for managing digital assets throughout their lifecycle, from issuance through distribution, servicing, and reporting.

Designed for financial institutions to bridge traditional and digital infrastructure, ComposerX addresses every aspect of the digital asset lifecycle while embodying the security, stability, and scalability that define the DTCC brand.

Discover how ComposerX can unleash your firm's potential.

Find out more

Why Institutions Are Bullish

Eric Peters discusses why institutions are bullish. Tune in for a deep dive into the rise of fiscal dominance over the past few years, what institutions are interested in and crypto's biggest opportunities in 2025.

Listen to Empire on Spotify, Apple Podcasts or YouTube.

NO SLEEP TILL BROOKLYN

Permissionless IV is where you stress-test your vision. This conference is for the engineers, founders, and devs building the next cycle's backbone. If you're scaling infra, rewriting DeFi, or experimenting with new primitives, join us.

Speaker applications? Open.

Hackathon devs? Your ticket is covered.