ABSTRACT
We always talk about peace, BUT DO we ever dare to think, a society/world without terrorism, unfairness, malpractices, Gang of Bad guys??
If you dare to think beyond possibilities then take a pause and GO AHEAD in reading this paper. This will help you in taking the break through DECISION!!!
Now in a nutshell, this paper examines the problems with hard currency. It proposes cashless world in the complete digitally connected world is the only solution for different acts of unfairness, terrorism etc. It examines threat scenarios, challenges and describes a migration path.
DEDICATION
This work is dedicated to author’s soul mate Sapna who passed away in 1989. She has been his inspiration even during fighting the deepest blue moments of his life.
IPR Declaration and Copyright Notice
Author is pursuing IPR(s) for some of the ideas described in the paper.
Contents in this paper are copyright protected. All rights are reserved.
Entities and people who need to reproduce to other places in any media (such as print or electronic), please contact srivastava_samir@hotmail.com
1) Definition/Need of Currency
Hard Currency came as common denominator to value products and services. A pot maker needs food grains for eating and farmer needs pot to keep things, how can they exchange their goods. It is difficult to arrive on equality equation. Even if they come to some equality equation, timings and requirements also need to be considered. Suppose person A offers product or service X, but person B whose product or services A is taking right now, may not be needing X. People needed something to value their product and service. That's how the hard currency came into the existence.
2) Problems Because of Parallel Economy
Parallel economy of bad persons has created lot of issues. A big percentage of parallel economy is kept in the form which contributes almost nothing to productive activities. We cannot analyze the situation correctly to make effective economic policies. It has created a system where GDP is not reflected in the quality of life of citizens.
Various reports of Financial Action Task Force (
www.fatf-gafi.org ) suggest that money laundering (Hawala Transaction) and money from drugs funds the terrorism, which is difficult to trace.
In different dealings, bribery is involved. There is no trace how inferior things are chosen, and it creates the problem further.
The unreported cash transactions cause tax loss to governments. This results in need of big chunk of bureaucrats to inspect the businesses. This opens up another avenue for bribery and problem keeps growing. Bribery has created corrupt officials, political systems and society.
Currency bills are printed illegally also. It is near to impossible for the common person to differentiate between legal and illegal currency bills.
AIDS is spreading as prostitution is major source of it. Containing prostitution has been near to impossible since ages.
There are other kinds of activities on the internet such as spamming, phishing too, to draw the funds. It has created never ending cycles of catching the bad activities on internet. It is difficult to find traceability between beneficiary’s account and malign contents. Internet was designed by purists but it is being punished for impurity in humans. It has created such a painful situation that researchers started looking into the redesigning the internet for security.
In countries like India situation is much worse. According to National Institute of Public Finance Policy the black money involved is nearly Rs4O, OOO crores ( $ 10 billion, where $1 ~= Rs 40) which is 20 % (nearly) of the GDP. This size of the black money has grown fast over the past many years. It is well known that annual growth-rate of black money is much higher than the annual growth-rate of GDP. The size of black money is too huge.
In India, there is dowry involved in marriages. With the advancement in medical systems for determining the gender early in the pregnancy, the unethical/illegal act of abortion of girls is very common. Due to this, boy to girl ratio is changing drastically, and it will result in societal imbalances in future.
In India, education system is also suffering from unfair practices. With bribery, incompetent students get the admission in various institutions through competitions, and then they create further problems. It is near to impossible to trace it always.
An analogy to ponder, can we design a knife to cut only vegetables (not the neck of humans). Author is of the opinion that we need to address the problem at the motivation level or we will be always in N+1 cycle of security.
In a nutshell, our hard currency is age old and we are witnessing lot of issues with it. We are not able to fix these, as it lacks the traceability and it needs to be changed.
3) Solution
Imagine a complete digital world connected with cell phones capable of performing business transactions. There the common denominator can be dealt only in computing devices henceforth referred as Soft Earning Unit. This eliminates hard currency and provides the end-to-end traceability of any kind of business transactions and brings the big stop to all malpractices in business which is the biggest hurdle in the real growth of any economy.
To eliminate the digital/telecommunication divide we need to bring the application on the computers which everybody uses. Hard currency is used by everybody. Conversely it is the application which will eliminate the digital/telecommunication divide, which we have been talking from a long time.
Author is of the opinion that Telecommunication (including mobile) should be fundamental right (at least with emergency calling and transactions in soft earning unit features) of the citizens. Cell phone should be affordable for everybody. Below are some facts about the communication in the world
Population: 6,602,224,175 (July 2007 est.)
Population growth rate: 1.167% (2007 est.)
Telephones lines in use: 1,263,367,600 (2005)
Mobile Users: 2,168,433,600 (2005)
Internet users: 1,018,057,389 (2005)
-Source https://www.cia.gov/library/publications/the-world-factbook/print/xx.html
With world population estimates of 2007 and mobile users of 2005, we can see 1/3 of world population is connected with mobiles. It should be noted that mobile penetration is as high as 70% in the several developed countries and in some countries it is more than 100%. Here regulators, cell phone vendors, cellular providers have to come up with business models scale to economies which can enable the complete world to be connected with cell phones and have a sharing of network with minimal cost.
As per author’s research on the web, the first article on cashless society appeared in NEW DAWN No 33 November-December 1995 www.newdawnmagazine.com (Referred with permission). Companies which tried earlier for cashless society didn’t seem to succeed as they were trying via PC. They were trying to bring more it through different type of magnetic strip cards. It was said in various articles, that cash will exist for usage in grocery stores etc. At that time, mobile penetration was not high and argument for everybody to be honest at a single point of time (refer later part in the article for this) was not brought out to fellow humans. This paper provides much more detailed analysis for readers to take a closer look. It is very similar to video telephony which was invented way back, but it is more used now due to various reasons.
When banking got established, we got the "Check mode of payment" and then we got the "magnetic strip card" mode also. Though at the time of invention they were not intended to replace hard currency yet in author’s opinion they could not replace it due to various reasons given below:
3.1) Why Check Mode Could Not Replace the Hard Currency
For transactions one has to visit the banks. Check has never been considered as cash equivalent, till it gets cleared from the payer’s account. It is less convenient and earlier it used to take a long time to clear the checks. It is common in several places to sign the fake checks. Check bouncing also happens. Even in the countries like US, extra pain of photo ID verification is associated with it. Unavailability of funds at the time of need, mostly due to banking working hours constrain, withdrawal restrictions (with ATM also), delay in Inter-bank check clearing (major cause of concern in developing/under developed economies) which forces customers to either do the cash transaction (if possible) or bear the heavy cost of Bankers Check or Demand Draft (with pain of customer visits to banks) etc. More importantly this kind of transaction is not the real time and delay/ losses are bound to happen in a fast moving economy. This gives the birth to online banking. Unfortunately it also has the herculean task unanswered of inter banking sharing of network. Issues like protection of customer data, Real time Gross Settlement of funds are still the cause of concern for almost everywhere e.g. ing.com takes 3~4 days generally for fund transfer from different banks (personal experience may vary).
3.2) Why Magnetic Strip Cards Could Not Replace the Hard Currency
Till now, in the business models payee, merchant or bank has to bear (share) the cost of transactions, which is add on to the cards annual fees (Not all cards come free for lifetime). For person to person transactions in home and other places it requires extra hardware like fixed phone line connection with financial institution, machine to swap the card. In fact there are reported cases of fraudulent transactions with it. These transactions are capped by some limit also.
4) Effects of Soft Earning Units
Parallel economy of bad guys becomes traceable. This attacks the problem at the root. We have been attacking the problem by detection instead of avoiding the problem. Setting up the detection points at various places in the systems is more cumbersome. Using the different mechanisms, funds goes to the bad guys for their bad actions, which they use openly in open market. Nobody can find out how that is earned, even with our lot of detection points employed in the system. With traceability provided by soft earning units, we can trace the source of funds.
With different incidents of terrorism, it is evident that detection mechanism is not sufficient and we need traceability of funds badly which is provided by Soft Earning Units to fix it.
Similarly it goes for different unfair means such as bribery, kick backs, dowry etc. People do unfair actions, and they get money for it which they can use everywhere. There are cash payments involved in so many places, where people get unreported earnings. Soft earning units provide the traceability to fix this. Relationship between the events and funds transferred in soft earning unit format will catch the bad activities right away.
It will help in containing the prostitution right away as sexual workers who are going to get earnings mostly from opposite sex members can be traced. It will create pressure on the persons visiting them by their partners (They might ask for this kind of information sharing). It will help in finding the big persons who are protecting them. Soft Earning Units will definitely help in containing it, and further containing AIDS.
It is environment friendly as we don't need paper and metals for currency. It obsoletes partially current financial systems and provides ease of usage.
5) A Historical Case Study
Mohammad Tuglak (~1300), An Indian king tried to exchange the gold/silver coins with copper. People melted their household pots to generate fake currency and used gold/silver coins for ornaments. The scheme failed.
In our case, Soft Earning Units cannot be generated, as they are protected by various security schemes such as authorization etc. Keeping hard currency is just waste paper with no alternate usage.
6) Threat Scenarios
6.1) Gang of bad persons can still hold the hard currency and exchange it for their illegal acts
Bad persons will not be able to use it publicly in open market for anything else. The big DON will end up having lot of the hard currency which he/she will not be able to use it in the open market.
6.2) Bad persons can print the hard currency (or use anything else) illegally
Printing of illegal currencies exists with hard currency also. Soft Earning Units makes this situation better, as they cannot be generated by bad persons.
Differently bad people can exchange anything else such as gold. But gold will start accumulating at the big DON, who will not be able to use it in the open market to buy anything else.
6.3) People can do bad work in geographic region which has adopted soft earning units but exchange the currencies in other geographic region which has not adopted it
This practice is in use with hard currency also. How many people can travel to use it and will have access to open the account in that geographic region? Dealing in non-soft-earning-units can be tracked at the boot-strap time itself, when somebody visits that region or transfers funds from foreign account.
6.4) People can exchange the goods which they can consume themselves for the bad work
The above threat scenarios are within the frame of common denominator. In this case, Person A can ask for some product or service X from person B for some bad work instead of soft earning units. Person A consumes the X. Person B is producer (or buyer from open market) of X, but X is not sold against soft earning unit to person A. Here biological limit on consumption by humans and expiry limit on products will help in containing the wide usage of this practice. Services require need by the person doing the bad work, which may not be needed at that point of time.
If Person A starts taking different X from different persons for bad work, then person A will be living on without/less Soft Earning Units earned legally. This will be caught by different threshold limits set by regulators.
When person A instead of consuming X starts selling it, then it will be caught for the source of it, as somebody will be paying him/her soft earning units.
We don’t need to catch the gifts given on various occasions such as religious festivals, anniversaries. We only need to catch gifts only in some geographic regions for gift tax but generally they don’t apply to consumables.
To catch consumption, we need complete multi-media recordings. One can argue that when white house records US President’s move, then why not common person. Recording may be in machine readable form, and they will be turned into human readable form in case of suspicion when regulators approve based on some thresholds of events. Here cost trade-off and privacy needs to be balanced.
Bad persons can come up with some oral or other recording of number currency system for their products/service exchanges. Oral system will not work for long, as humans have tendency to lie. Also in this scenario, bad person with high volume and high value of product/service will end up with credits, which cannot be used anywhere else.
Bad persons will realize that it will result in chaos similar to situation which would have resulted in the birth of hard currency.
If we implement Soft Earning Units even without multi-media recording, it will address major acts of unfairness such as terrorism, misuse of internet (spamming, phishing etc), theft and illegal generation of common denominator (currency), bribery, dowry etc.
7) Challenges
7.1) Powerful bad politicians may create hindrances
Politicians cannot say anything PUBLICY against the Soft Earning Units, the hindrances created can be only behind the scenes. Bunch of bad politicians cannot negate this for a long time. Sooner or later they have to adhere to public opinions or power regime will be changed by public.
7.2) Hindu followers may ask for cash, as it is donated in Hindu Temples / Worships at homes
Earlier gold/silver coins were used, which are not used now. So they adapted to changes earlier. Checks dealing in soft earning units for this purpose can be used to give the same sense of donation feeling.
Alternatively, funds transfer in Soft Earning Units using SIP AOR or Cell number associated with temples or owner/priest at home can be done. Off-late donations in some temples are managed by professional trust also and hence adoptability cannot be a difficult exercise. Only a time lag might occur, which can be worked out with mutual understanding without hurting the sentiments of any part of society.
7.3) Beggars are biggest issue for this change
Hopefully immense energy of human resources will be channelized in more meaningful ways to solve other problems and this practice will be abolished from the society. Even if it remains, they have to advertise their SIP AOR or Cell number for collection or collect checks in the soft earning units.
Here we need the help from parties involved in providing the communication service and regulatory bodies to make it affordable/free devices for dealing in soft earning units and from the financial institutions to help everybody to have a bank account.
Who knows the future of beggars, it might be awkward now, but remember many bad social practices have been abolished. With respect to mobile itself, nobody forecasted it being NECESSITY of daily life, when it was invented.
7.4) Vending machines upgrades will be needed
They have to advertise their charging entity’s SIP AOR or Cell phone number of the charging entity. They need to be upgraded in view of RFID and are in process of deployment for accepting magnetic strip cards. RFID and Soft Earning Units upgrade can be clubbed together. Alternatively magnetic strip cards will be switched at the back end to deal in the Soft Earning Units and cash mode of payment will be blocked.
This is one time exercise and regulatory body will intervene and they will be willing to do it, by seeing long term benefits. Moreover, it can be an added feature for vendors to penetrate the market and has a win-win situation for society as a whole.
7.5) Privacy advocates may not like third party knowing their earnings and spending patterns
We use magnetic strip cards and direct deposits to banks. Third parties know about our earnings and spending in the hard currency case too. We use search engines so often, search providers can also figure out our interests etc. This is in machine readable form, and it will be coming to human readable form when there is suspicious or threshold crossing limits. Currently using similar mechanism for cash activity, money laundering is found out. Refer information from Interpol at the below link
http://www.interpol.int/Public/FinancialCrime/MoneyLaundering/hawala/default.asp
In a nutshell, situation is not changing drastically for privacy advocates.
8) Migration Path
Regulators will announce a point in time, after which hard currency will not be used in that geographic region. Before this point in time, people have to bring hard currencies to regulatory body and they will be translated to soft earning units of that geographic region. Values of fixed assets like real estate and other living beings such as animals will be converted to soft earning units.
There will be time intervals when some geographic regions will be dealing in Soft Earning Units only and others dealing in their hard currency. Similar to current currency conversion system will be applied during this interval.
Operational model of migration plan can be decomposed into phases such as trial with Soft Earning Units with transactions above certain limit within some sub-geographic regions such as cities, states etc. And after verification of systems, it can be deployed within a geographic region such as countries etc.
9) Reason for Quick Adoption by People
Everybody wants to be honest and fair. But nobody wants to take a lead, as he/she feels others are using bad methods to earn the money, so why he/she should be deprived. Others should stop first. A few, who tried to take a lead, have been thrown out by the system.
Time is changing now. People are not ready to accept anything which used to happen earlier, it maybe bribery for getting things done or not questioning any move whether judicial or political. Today people are getting united for the cause and not for individual anymore. Author is having the opinion that today’s ‘Common Person’ is ready for change and is not ready to suffer any more by a bunch of people who are dictating the terms and conditions as per their own whims.
Things have to change at a single point of time, in case of leadership problem. The defined migration path provides a SINGLE POINT of time (or a very short time window) after which hard currency will not be used within a geographic region and everybody will be honest with Soft Earning Units. Big chunk of the people, who want to be fair, will become advocate of this change and then regulatory bodies have to listen to the public opinion for the change.
10) Contactless Payment
Here we are bringing the payment through cell phones instead of it through magnetic strip cards. Till we have proven 100% (no five nines) availability, we need to defer it. We are still witnessing the issues with batteries, short circuiting while charging and talking, loss of signals, big change in temperatures etc. Till then, we need to have the Soft Earning Unit environment (with cell phones as in contactless payment for magnetic strip cards) with different alternate modes such as check, magnetic strip cards. In business transactions people will use the magnetic strip cards dealing in Soft Earning Units or check dealing in Soft Earning Units as an alternate mode and in person to person transaction people can use checks dealing in Soft Earning Unit as an alternate. Cell phones are currently tied to a single provider and they are marketed by providers (with different deals) in different geographic regions. They need to be open up for different providers for our target of 100% availability.
11) Conclusion
The fairness in society will increase, as the degree of digitalness increases. Complete digital world with Soft Earning Units is the only way for our liberation from all acts of unfairness, thefts, terrorism etc. Instead of investing our resources in putting the detection points at various places in the system and trying to fix the problems at the surface momentarily, we need to invest in achieving complete digitally connected world with no hard currencies. It is recommended to take out the hard currency from our financial system and keep other components as such.
Author would like to request the readers to voice their opinions to their representatives in regulatory and governing bodies and various polling agencies / news channels to poll the public opinion on the proposed change.
12) Acknowledgement
Author would like to thank Sukesh Kumar and Ratnesh Kumar, who brought up the availability point, which I countered initially with five nine availability and later figured out that we need hundred percent proven availability before we merge other modes. They have contributed in terms of text and editing also. Author would like to thank Ratnesh Kumar for bringing out additional malpractices.
13) References
SIP AOR:
Session Initiation Protocol, Address of Record. Refer http://www.ietf.org/rfc/rfc3261.txt