There is a revenue stream most citizens never notice.
It does not come from income tax or VAT. It is not debated in election campaigns. It does not arrive with a bill. Yet it has funded governments for centuries.
It begins with a banknote.
When a central bank issues a £50 note, the production cost is a fraction of its face value. The note enters circulation at full value. The difference between cost and purchasing power is known as seigniorage. In simple terms: the public accepts a piece of paper as money, and the state captures the gap between what it costs to produce and what it is worth in trade.
That gap is not marginal. Across major economies, seigniorage contributes billions annually to public finances. It strengthens balance sheets. It reduces borrowing needs. It anchors monetary sovereignty — the ability of a nation to issue its own currency and derive value from that trust.
Cash, in other words, does economic work long before it is spent.
What changes when money becomes code?
Central banks across advanced economies are exploring central bank digital currencies — state-backed money that exists entirely as code. Public discussions often circle around payment speed or innovation. Yet a more fundamental question sits beneath the surface:
What becomes of seigniorage — and the wider public interest — if physical cash is marginalised or replaced?
To understand the stakes, it helps to look at what cash does beyond the margins of production cost.
Sovereign money in its purest form
Cash is direct sovereign money. When a note circulates, it is a liability of the central bank. There are no intermediaries collecting transaction data or extracting fees from each exchange. The revenue captured through seigniorage flows to the public purse.
It is a simple mechanism with structural consequences: trust in the currency translates directly into public value.
Resilience in a fragile system
Cash operates without infrastructure dependency. It does not require electricity, connectivity, platform access, or biometric verification. During cyber-attacks, system failures, or natural disasters, it continues to function.
Resilience is not abstract. It is what allows commerce to continue when networks fail. In a digitised economy, redundancy is not inefficiency; it is insurance.
Access without permission
Cash lowers the threshold for participation. No minimum balance. No approval process. No algorithm assessing risk.
For migrants, the elderly, informal workers, and those excluded from formal banking, cash remains an entry point into economic life. Financial inclusion, in this sense, is not about applications. It is about access without gatekeepers.
The architecture of digital currency
A fully digital monetary system alters these dynamics.
Digital state money can be traceable. It can be designed with programmable features. It can — depending on architecture and governance — place conditions on how funds are used. Proponents argue that such features improve policy targeting or reduce illicit finance. Critics warn that they expand the technical capacity for surveillance and behavioural control.
Both sides acknowledge the same fact: digital money is structured differently from paper currency. Its architecture determines the balance of power between citizen, state, and intermediary institutions.
There is also the question of economic concentration. If physical cash declines sharply, payment systems consolidate around digital platforms — public or private. Transaction data becomes a strategic asset. Infrastructure shapes influence.
Efficiency is not the only measure
None of this means digital innovation should be dismissed. Payment systems evolve. Societies modernise. Efficiency gains are real.
But efficiency is not the only measure of a healthy monetary system.
Cash represents distributed autonomy. It allows individuals to transact without leaving a data trail. It provides a public form of money that is universally accessible. It generates sovereign revenue without imposing a fee on each exchange.
Removing or sidelining it would not simply update payments. It would reconfigure the financial relationship between citizen and state.
The decision before us
The debate should move beyond convenience. It should confront structural questions:
How is public revenue affected if physical currency contracts?
What safeguards protect privacy in a programmable system?
How do we preserve universal access in an increasingly digital economy?
What redundancies remain when networks fail?
Money is not merely a means of exchange. It is an institution shaped by political choices about trust, authority, and participation.
A society can innovate without dismantling its safeguards. The challenge is not choosing between paper and code. It is ensuring that, whatever form money takes, it continues to serve the public — and sustains the economic foundations that cash has quietly upheld for generations.
