ID Cash – the best of cash and none of its risks

As the world becomes cashless what will happen to the notes? Apparently De La Rue (the world’s largest producer of cash) is cutting its production lines in half. The reason for the cut back stems from cashless payments.

The world has ‘cashophobia‘. Denmark deems it relative legal tender, Sweden is heralded as the near perfect cashless society and ‘contactless’ in the UK is growing exponentially. There are also policy concerns: in a meeting in Miami where FinCEN was attending they mentioned that they would prefer if cash didn’t exist (due to the obvious money laundering risks) but they realise that that isn’t possible for the foreseeable future.

Cash is a bearer instrument – its purchasing power is transferred via possession alone so is an inherent money laundering risk.

That said, there is a genuine purpose for having secure pieces of paper that are very difficult to forge even as we move into a cashless world.

I have been thinking of how you could use cash as a secure payment instrument but attribute it to identity.

How about if you could send someone a £20 note and then via your phone, transfer ownership to them? (Seems like a lot of work for £20). However this means you could send a £10,000 note in the post securely (not sure if BoE would agree to issue a £10,000 note) and when the receiver confirms receipt of the paper you would then assign ownership to them – this is ID Cash. Huge denominations of ID Cash would be useful for trade finance rather than using Letters of Credit and they would not be restrictive to a particular context; they could move across the four corners of the earth but the value only ever transferring with identity. To be clear, ID Cash is not a Cheque (which is a promise to pay), this is value as a bearer instrument but with identity controls.

By way of example: Person A (below) sends ID Cash in post to Person B. Person B receives the paper, scans the QR code on the note that brings up a webpage where they confirm receipt, this pushes a notification to Person A who then confirms the transfer.

This would address ALL the money laundering concerns of cash, yet at the same time be secure.

The best thing about cash is that it is unique (serial number) and secure piece of paper. Cash as paper is so secure that it is actually (mis)used by Hawala agents. In India, a Hawala agent (apparently, never tried it myself) passes you a 10 Rupee note as receipt of payment and, when this note is presented to the cash-out agent in say Southall, London, all the agent does is check that the note is not a counterfeit and cross-references the serial number against a spreadsheet and then pays out the bearer whatever is due. The 10 Rupee note is not valuable for the 10 Rupees; it is only valuable as a secure/unique receipt.

If you were able to iterate on this concept you could bring back the bearer bond/share with the full security of an attributable ID. Food for thought on a Friday.

Thomas Oliver Matthews