Should we fear a cashless society?
Updated: Oct 17
This essay was written as an entry in the Economics category of the 2026 John Locke Institute Essay Prize, where it received a Very High Commendation.
The question of whether we should fear a cashless society is inherently dependent on the interpretation of its key terms: fear, cash(less) and society. This essay interprets fear not as irrational panic but a rational response to systemic risk. Society is understood as the relationship between citizens, institutions, and the state, whilst cash is treated as an instrument designed to hold value outside institutional control. Consequently, a cashless society represents an economic structure where payment relies entirely on digital transactions.
My case for caution centres on the argument that a cashless society grants the state a historically unprecedented monetary lever – specifically through the unconstrained application of negative interest rates. Counterarguments concerning crime, financial inclusion, and macroeconomic flexibility are addressed; although these reveal advantages to digitalisation, they ultimately fail to resolve the deeper systemic concerns surrounding institutional monetary power.
Historically, cash evolved into an instrument of exit – a bearer asset allowing value to be held outside institutional custody. This principle that money could be spent, saved, and transferred without intermediary knowledge forms the foundation of liberty as defined by Acemoglu and Robinson (2019). Liberty exists only within the “Narrow Corridor” - a delicate zone of balance where neither anarchy nor despotism can survive (Acemoglu and Robinson, 2019, p. 4). In this corridor, vigilant citizens maintain a Shackled Leviathan, ensuring the state neither lags into lawlessness nor sprints ahead into tyranny. Central to this civic power is financial autonomy. When wealth exists only within institutionally controlled ledgers, the state gains the capacity to neutralise dissent by restricting access to funds, freezing assets, or eroding value through monetary policy. The Negative Interest Rate Policy illustrates one mechanism through which society may lose its race against the Leviathan.
The European Central Bank first implemented negative deposit rates in 2014 (European Central Bank, 2014) in response to deflationary pressures following the 2008 crisis, intended to penalise hoarding and incentivise spending. However, this risks shifting consumer behaviour away from voluntary confidence-driven spending toward policy-driven expenditure.
Currently, the existence of physical cash subjects the NIRP to the Zero Lower Bound (Krugman, 1998) – a theoretical floor below which nominal interest rates cannot practically fall, as further cuts lose transmission effectiveness. The ZLB remains a monetary policy constraint on central banks’ abilities to implement negative interest, and a fully cashless society removes this constraint, allowing rates of -5%, -10% or beyond to be imposed, creating a systemically compelled spend-or-lose situation. Whilst historically citizens have retained some domain of economic power which the state could not directly command – physical currency serving as the material expression of that boundary – the removal of cash compels every citizen to use private or state-run digital ledgers where wealth is electronically degraded through the NIRP. This subjects one’s property to fluctuating political, economic and social demands of central bank technocrats, rather than stable law, thus eroding a foundational safeguard against authoritarianism.
Whilst critics may debate these probabilities, it remains significant enough to warrant caution. Society refers to relational properties between the state and citizens; the negative interest rate trap may not necessarily be used by governments, yet the infrastructure of a cashless society fosters a permanent temptation. Pettit (1997) defines freedom as non-domination; a slave under control of a benevolent master allowing him to do as he pleases is still a slave – his master may withdraw his autonomy anytime. Liberal democracies are often evaluated according to how current governments behave, yet infrastructural design must also account for how power could be exercised under future administrations, during crises or under shifting political norms. For instance, central bankers do not typically implement deeply negative interest rates out of malice, instead intending to rescue the economy during a deflationary spiral. Yet the primary concern isn’t intention, but whether the framework of society permanently grants capacity for domination. A cashless infrastructure, once built, creates the conditions for that capacity – regardless of who governs.
Both mechanisms – gradual wealth erosion through NIRP and discrete emergency seizure – share a common systemic precondition: that citizens hold no assets outside the institutional ledger. The 2013 Cypriot bail-in demonstrates the second mechanism (Michaelides, 2014). Whilst the 2013 bail-in directly affected large depositors with sums above €100,000, the legal reclassification of deposits as unsecured creditor claims is a governance-related feature of commercial banking that a cashless society would universalise by eliminating the cash exit option. Simultaneously, to prevent a catastrophic run on the banking system, strict limits on daily ATM withdrawals were imposed; physical cash was the only asset retaining liquidity, and it had been partially locked in. Cyprus proves that when a bank faces insolvency, unsecured loans can be legally converted into equity or wiped out to absorb the institution’s losses. An entirely cashless society introduces a heightened capacity for absolute capital controls, since functioning in such a society legally forces citizens to become unsecured creditors to commercial banks in the absence of a CBDC. The concern is not that digital systems introduce entirely new forms of state power, but that cashlessness removes the structural constraint that limits how far those powers can be extended.
Critics may nevertheless argue that this case proves financial autonomy is already largely illusory within modern digital societies, yet a broader transformation in the function of money itself is revealed. In a cash-based system, currency primarily acts as a medium of exchange and store of value. In a fully cashless society, money increasingly becomes a mechanism through which institutions can regulate behaviour, enforce policy objectives, and condition participation in economic life. Therefore, the main issue is not simply surveillance, but the fusion of monetary infrastructure with political authority. Once all economic activity depends upon permissioned digital systems, financial participation becomes dependent on centralised approval in a way physical cash historically prevented. Financial autonomy is regarded as central to political freedom because participation in economic life conditions access to nearly all other liberties; a citizen unable to purchase necessities or save their own money cannot truly exercise freedoms of association, protest, movement, or expression.
Undeniably, surveillance does already take place today – CCTV records transactions in shops; mobile phones log users’ locations; loyalty programmes track purchasing behaviour; banks monitor digital transactions. However, though this argument highlights existing surveillance, it conflates surveillance with absolute control. CCTVs and loyalty cards form the passive ledgers that record transactions which have already happened, whilst absolute control takes form of a world where programmatic rules may be used to set expiration dates and automatically deduct negative interest. This means the state can pre-emptively block choices; representing a shift from ex-post surveillance to ex-ante architectural control (Lessig, 1999). Whilst data is reviewed ex-post under contemporary commercial banking systems, programmable money fosters the architecture allowing rules to be directly embedded into the currency, making non-compliance structurally difficult.
Yet supporters of cashless systems argue that these concerns are outweighed by the social and economic harms cash itself enables. Rogoff (2016) posits that cash enables criminal activity such as tax evasion, corruption, money laundering, and black-market economies; estimating that eliminating high-denomination notes would meaningfully reduce crime. Rogoff also points to increased convenience, reduced transaction costs and greater financial inclusion through digital banking infrastructure. Sweden’s experience suggests that high-trust societies with strong democratic institutions may sustain extensive digitalisation without immediately collapsing into authoritarian control (OECD, 2024). From this perspective, preserving cash in the name of liberty may also preserve the infrastructure enabling parallel criminal economies that weaken democratic states themselves.
Yet this objection underestimates how constitutional frameworks shape future political possibilities. The existence of criminal uses of cash does not necessarily justify eliminating anonymous exchange entirely. Liberal societies routinely tolerate certain freedoms despite their misuse because abolishing them outright would create greater infrastructural risks than those they solve; during the 2022 Canadian trucker protests, financial accounts linked to demonstrations were frozen under emergency powers (BBC News, 2022). Regardless of one’s view of the protests themselves, this case explicitly demonstrates the coercive capacities already embedded within digital financial infrastructure, even whilst physical cash remains a partial exit. In a completely cashless society, the state is given the capacity to completely withdraw dissenters’ financial autonomy. Additionally, whilst digital transaction economies may have increased convenience and greater financial inclusion, efficiency alone cannot determine the legitimacy of systemic design; particularly when societal liberties are at stake.
Rogoff's second objection to cash concerns macroeconomic effectiveness rather than crime: physical cash weakens the ability of central banks to respond effectively to severe recessions. The ZLB can trap economies in prolonged stagnation by preventing sufficiently expansionary monetary policy. Implementing negative interest in the Eurozone post-2008 meant banks were financially incentivised to move money off balance sheets by offering cheaper credit and loans to businesses and households. Similarly, the NIRP boosted export competitiveness through weakening the Euro; done via a capital outflow from the Eurozone after investors withdrew due to negative interest. European goods sold cheaper on the global market. However, the continued existence of cash constrained how deeply negative rates could go, limiting the overall effectiveness of the stimulus. In this respect, eliminating cash may increase macroeconomic flexibility during crises rather than merely expanding state coercion; the concern here is not NIRP as a bounded tool, but the permanent removal of the floor that prevents its unlimited application.
In contrast, history demonstrates that emergency economic instruments rarely remain confined to the crises that justified them; they instead exhibit a distinct ratchet effect. Just as the income tax was introduced as a temporary war-time measure in the UK, and post-2008 Quantitative Easing became a decade-long fixture of monetary policy, the infrastructure required to enforce deeply negative interest rates may outlive any singular recession. By eliminating cash to bypass the ZLB, central banks do not just engineer a temporary stimulus; they permanently dismantle the citizen’s primary economic exit option. The issue is therefore less whether deeply negative rates could ever be economically useful, but whether a short-term crisis response can be exploited as a permanent mechanism of monetary compulsion.
China illustrates the trajectory toward this completed architecture in practice. Whilst not yet fully cashless, its rapidly expanding digital payment ecosystem – integrating platform surveillance, transactional data, and state authority – demonstrates how monetary governance and political control increasingly converge under central authority (Lin & Milhaupt, 2023), rendering the ZLB essentially irrelevant where the state controls the ledger. Whilst Western countries use surveillance capitalism (Zuboff, 2019) to predict and modify commercial behaviour, China increasingly embeds ex-ante control directly into financial infrastructure. The direction of travel is legible before the destination is reached.
The concern is not that surveillance is new, but that removing cash closes the independent monetary space between imperfect and total control – and that gap is what democracy is able to run on. Although cashlessness is not inherently tyrannical, and partial digitalisation may produce substantial benefits, eliminating cash entirely removes the material exit option through which citizens can hold and exchange value independent of external permission. The central issue is therefore not efficiency itself, but whether democratic societies should eliminate the final practical limit on centralised monetary power.
To return to my initial definition of fear as rational concern and society as a relational structure, the relationship between citizens, institutions, and the state is defined in part by what citizens can do that institutions cannot observe or prohibit. Over time, physical cash came to provide a practical domain of economic life outside continuous institutional oversight, and a cashless society closes that domain permanently and does so not by force, but through the quiet apparatus of convenience. The argument here is not against digital payments as such – it is against the complete elimination of the cash alternative, which removes the only exit that does not require third-party permission. Fearing a cashless society is not irrational panic; but a rational response to a fundamental redesign of power with significant implications for liberty. The question is not primarily whether a society can be trusted with a new power, but whether it should be designed to need that trust initially.
Reference List
Acemoglu, D. and Robinson, J.A. (2019) The Narrow Corridor: States, Societies, and the Fate of Liberty. London: Penguin Press.
BBC News (2022) ‘Trudeau vows to freeze anti-mandate protesters’ bank accounts’, 14 February. Available at: https://www.bbc.co.uk/news/world-us-canada-60383385 (Accessed: 27 May 2026).
European Central Bank (2014) ECB introduces a negative deposit facility interest rate. Available at: https://www.ecb.europa.eu/press/pr/date/2014/html/pr140605_3.en.html (Accessed: 27 May 2026).
Krugman, P.R. (1998) ‘It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap’, Brookings Papers on Economic Activity, 1998(2), pp. 137-206. https://doi.org/10.2307/2534694 (Accessed: 27 May 2026)
Lessig, L. (1999) Code and Other Laws of Cyberspace. New York: Basic Books.
Lin, L.Y.-H. and Milhaupt, C.J. (2023) ‘China’s Corporate Social Credit System: The Dawn of Surveillance State Capitalism?’, The China Quarterly, 256, pp. 835-853. https://doi.org/10.1017/S030574102300067X (Accessed: 27 May 2026)
Michaelides, A. (2014) 'Cyprus: from boom to bail-in,' Economic Policy, 29(80), pp. 639-689. https://doi.org/10.1111/1468-0327.12040 (Accessed: 27 May 2026)
Organisation for Economic Co-operation and Development (2024) OECD Survey on Drivers of Trust in Public Institutions – 2024 Results: Sweden country note. Available at: https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_a8004759-en/sweden_11ca1946-en.html (Accessed: 27 May 2026).
Pettit, P. (1997) Republicanism: A Theory of Freedom and Government. Oxford: Oxford University Press.
Rogoff, K.S. (2016) The Curse of Cash. Princeton: Princeton University Press.
Zuboff, S. (2019) The Age of Surveillance Capitalism. London: Profile Books.
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