Source: iStock/Germanovich

Juan Villaverde is an econometrician and mathematician devoted to the analysis of cryptocurrencies since 2012. He leads the Weiss Ratings team of analysts and computer programmers who created Weiss cryptocurrency ratings.

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I’m worried.

With each passing day, I see more signs of central governments around the world working in concert to reduce, and ultimately eliminate, the use of physical cash.

Their goal: To eventually force all liquid assets and transactions to the custodianship of state-regulated, state-sponsored or state-owned financial institutions.

They want complete control over money.

To be sure, there are some valid reasons — to help combat money laundering for the drug trade, human trafficking, cyber warfare and terrorism.

“Anyone opposed to the elimination of cash must have something to hide,” claim the governments. “But if you’re a law-abiding citizen, you have nothing to worry about.”

If you live in a democratic society rooted in the rule of law, you might be inclined to agree.

If you live in a society that’s autocratic, corrupt or both, you will immediately see through the rhetoric.

And if you recognize that, over time, nation-states can often devolve from the former to the latter, you will insist on retaining direct control over at least some of your money in the form of cash.

Indeed, a ban on physical cash is a ban on free trade. And in essence, a ban on free trade is a ban on free speech.

At its very core, money is language, a method for communicating value. When you value a property, product, commodity or service, you have the freedom to express that value by making a bid, making an offer, or just completing a financial transaction at a predetermined price.

And there may be valid reasons for doing so in private, without every transaction tabulated and monitored by a central authority.

Again, don’t assume all governments are of the people, by the people and for the people.

To better understand why private transactions are so vital, put yourself in the shoes of a citizen living under the fist of a different kind of government …

You want to help fund a minority political party that’s opposed to the party in power. But everywhere you look, you see the rising trend of authoritarianism and fascism. You see opposition leaders jailed, their assets seized, their political rights usurped.

You also know that financial supporters of opposition parties risk a similar fate. But there’s a blanket ban on cash. All transactions are electronic, tracked by the nation’s financial institutions. And all financial institutions are overseen by the government. You have no private venue to fund the opposition.

So, you take a chance. You make a bank transfer to the account of an opposition official you happen to know personally. He’s told you he’s not among those blacklisted by the authorities or flagged by the banks.

But he’s mistaken.

Your transfer instantly triggers an alert to the federal police. Within hours, they block your bank account, seize your assets and even raid your home. They say you’re a traitor to your country. They accuse you of funding terrorism.

And all along, they insist that everything they do, no matter how extreme, is for the public good — to protect the safety of citizens.

If this sounds like a nightmare, it’s because it is.

Except for the blanket ban on cash, we’ve witnessed bank deposit confiscations in Brazil, Argentina, Uruguay, Venezuela and others — both under dictatorships and democratically elected governments alike. We’ve seen it in Greece, Cyprus and other so-called modern economies.

Suffice it to say that …

The elimination of cash is a dictator’s wet dream.

The elimination of cash creates a world in which money loses its primary property as a medium of exchange. Instead, that function becomes secondary, superseded by each government’s ability to use money transactions as a tool for political control and repression.

This perversion of the function of money may come suddenly. Or it may come with a series of more subtle, incremental changes in legislation and federal edicts.

First, the government says it’s targeting strictly terrorists, drug traffickers and money launderers.

Then, they may expand the scope to tax evaders or simply tardy tax filers.

Soon, it’s anyone the government deems “subversive” or “undesirable,” with no definitions of either term. Anyone who dares question the authority or legitimacy of the government is subject to asset seizures and arrest.

I already see the handwriting on the wall. And it’s not pretty.

I travel between Europe and Latin America quite often. I’m a citizen in both continents. And I can tell you flatly: For any citizen of the European Union, not having a bank account is tantamount to being a non-person.

You can’t rent an apartment. You can’t get access to the internet. You can’t purchase a vehicle. Not even a mobile SIM card. You certainly can’t get a job.

All of these things require a bank account, and in order to open one, you must report to the government. You have to tell the authorities where you live, how much you earn, and what you intend to do with your money. That information is then verified and monitored to make sure it’s accurate and current.

If you’re flagged for any discrepancies, your account can be frozen. You effectively lose the right to use your own property.

I’ve always thought that was pretty extreme. But more recently, I got a bigger shock:

In the small country I hail from, Uruguay, the government is now trying to pass legislation that forces all citizens into the banking system — a step many people believe is a prelude to the complete elimination of cash.

And those people could be right. Because cash elimination has been on the government’s agenda for quite a while.

Be forewarned, [%= :subscriberName(E, Investor) %]: The war on cash is real. It’s here. And if it’s not affecting you where you live, it soon could.

A Two-Part Solution

Your best protection against asset confiscation is cryptocurrency. If you store it on your private wallet offline and you don’t share your private key, no one can ever take it from you.

Your best vehicle for private financial transactions could be certain kinds of cryptocurrencies called “privacy coins,” which I’ll cover in depth in a future issue.

But I stress “could be” for a reason. As you’ll see, privacy coins also come with a host of very controversial issues.