 Good morning Vietnam. Yeah, probably some of you feel like you went through Vietnam. I know I did. I wasn't even here at the hotel last night, but thank you for coming out this early on the last day of DEF CON to see my talk. I'm impressed. So anyway, I'm going to get going. I've got a lot of information to go through in very little time. You can talk about the death of cash and how the loss of anonymity in our modern financial systems might not be such a good thing. Again, I'm going to talk about why they, and I'll explain who they is, hate cash, and there's some popular versions of how great it's going to be without cash out there, and I'll talk about that and the not so publicized version. Some acronyms for you, and then liquidity danger and some alternatives. So we'll get going. A little bit about me first. I have a small network security consulting company, do a little writing, do a little blogging, and talk to the banking industry a lot about what they want to do and what they see as important. What I'm going to be talking about today is sort of an overview of a book I'm writing about this subject a little more in depth coming out next year. And the primary subject is how government forces, business forces, strong crypto and globalization is pushing to eliminate cash from our financial systems for various reasons and why this is a bad thing, because some of you all may not think this is such a bad thing, and look at some pros and cons of what's coming. I'm going to make some bold claims here. I think cash as a store of financial value is going to be dead, at least in the U.S. in the next 20 years. I think that's the outside. I think it's more like 10. My old theory was that the government would actually outlaw cash, believe it or not. I think that's not even going to be necessary anymore. We're gladly like sheep running towards those new financial systems, and probably it will be a niche. If we still have it, it will be a very much a niche thing that your granny stores some in her mattress. Why is this so? Well, credit and debit is convenient. We all know that as technology people, we like E-things, right? Getting rid of things and having everything taken care of electronically and have it on your laptop, have it on a card. It's nice. How many of you all here carry more than, say, 20 or $30 on you at any given time? Well, it's nice. I like that. Because I think if you talk to younger people and kids, especially, they just use the card. Always use the card. Yeah, I would think people at this show would be a little more dubious of technology, but by and large, people are using the card and not carrying cash anymore. It's techy, it's modern, it's also easy to spend money, and it's being pushed relentlessly by everyone from the governments to banks to big business. Again, why is this a bad thing? A lot of folks say this is nice, it's easier. I can organize my finances and download my banking statements and so forth. Well, number one, loss of anonymity. You're being recorded, obviously, every time you use your card, every time you stripe it. And as we know, what this show is all about is how e-things get broken. And believe me, the banking side of e-things is no different than servers and corporate servers and websites. A lot of people like to think that bankers run their systems a little better than regular business. There are a lot of regulations, but in the end of the day, it's still that same system administrator that hasn't patched their system. It's still the same people running the system, so a lot of the same problems and dangers as we see from the daily announcements of problems in the banking system. There's also other reasons, your financial health, and I'm going to make another broad claim about how it might be bad for our national security. I'll get to that in a moment. What is cash? It's paper money, obviously, but it's other things as well, coinage. And nowadays, it's actually costing them more to make the coins than they are valued at. Nickel's worth about 5.7 cents because of the high cost of the metals and going into it. And again, this is another reason why government wants to move away from this because it's costing them to put this out there and we're getting away from what the money is really worth. Again, checks aren't necessarily cash, but I'm treating them the same for purposes of this because they're not as tied into their global electronic system. They're paper. They're basically a form of cash that you write and promise someone money, so I'm counting them as cash. And that's changing also with some new laws called Check 21 where banks and businesses now basically can take your check, tear it up, and turn it into an electronic document. In fact, most banks are already doing this and a lot of businesses are as well. If you notice you go to Walmart and they take your check and then they hand it back to you. Kind of weird. I don't like having to have that check still in my thing, but that's what they do. They just turn it into an electronic transfer right there at the point of sale. So that's kind of the way we're headed. And again, there goes that float if you ever had to depend on that. I know I have once or twice in my life, but now the float is almost non-existent, maybe a day, and maybe not even if they're doing it right there at the point of sale. And of course they'll still hold your money and not give you credit if you deposit it late that day for a day or two or maybe longer, so they're not changing that part of the financial system. What is the government hate cash? Well, it's dirty, germs, residual coke, maybe the bird flu might spread on it. That's not really the reason they hate it, but it's one of the reasons they don't like why they promote that it's not a good thing. It's expensive, it wears out like I talked about earlier, costs more money to make than it's worth, and bills have to be exchanged every couple of years. Relatively easy to counterfeit. I say this, they've kind of upped the ante a bit with their bill redesigns, but of course the counterfeiters will leapfrog that as well. And again, I think this is all part of it. They're sort of making the money look like monopoly money. Have you noticed how it's got this color and the heads are cartoonish almost now and it looks like European money, so I think they're debasing the money physically as well, just so it seems more like it's not really anything important. And again, most importantly, anonymous. Government hates stuff like this because they can't track it, they can't count it, and they can't find you if they need to. So why do banks hate cash? Well, it's hard to handle, it's expensive to handle. Relatively easy to steal. You have a gun, walk in, probably get caught, but still they have to track it differently, they have to treat it differently. There's a lot of requirements that go around cash and regulation. I'll talk about that in a moment. And they don't really make anything on handling it. In fact, they pay for checks and things, especially they pay clearing companies to handle those. So it's really more of a pain in the neck for them than e-transactions. Yeah, and again, the nice thing about e-transactions for them is they get to make a little bit of money every time you use your debit card. That's why they're pushing. You may just notice they really want you to have a debit card and they really push that, they advertise it. I have business accounts and they always want me to have a debit card with a business account so I can just debit my, and I don't like that. I like to have checks so I can record them, but they really want you to have that debit card so they can push those transactions to the e-world. And again, we pay for all this. It comes out in the end because they charge fees and the merchants pay those fees and in the end we pay those fees through higher costs. And this is all for just giving us access to our money. And in fact, doing it in an easier way through an electronic system, it can be lower, but they're actually making more money on it. Why do big businesses hate cash? I know it's a small business, I like cash, but the big businesses don't. Hard to handle, easy to steal, easy to pilfer, anonymous. There's a certain psychology behind using a card where people tend to spend more money because you don't run out of money in your card unless you get an NSF. If you have overdraft protection, things like that, you can kind of spend more than you might have. Another nice thing about the e-transactions for them is that it all goes into a database and can be spit out and we can be then marketed to based on that information. So they like the profiles that come from you using those e-transactions. Anybody use loyalty cards at supermarkets? It's kind of hard not to these days. I try not to if I can, because they then know what coupons to send you, where you're shopping, when you're shopping, what you're buying, and all the better to sell you. Something else. So we're turning into, as a society, a debit credit society, and we're getting away from a hard asset culture. Gold, gold standard. We started when we went to the gold standard and our money, why is a dollar worth a dollar? It used to be because we had so much gold set aside. Now, it's because we say it is. We're the United States and we say it's worth that much. Which works pretty good when we're the biggest economy and the number one superpower in the world. And we still are, but there's a lot of people gaining on us. And as that happens and we've seen the dollar just really start to die because they're not taking our word for it anymore that it's worth that. Our net worth is hanging out there in some electronic balance sheet. The bank doesn't have your money stored in their vault somewhere with your name on a little slot. It's just in a computer somewhere that you have so much money in your account. So what happens if those systems are down? How much are you worth now? Not a whole lot. What I call the subprime economy in developing is where we're blurring the line between what you own with an N and what you owe with an E. And it might not be the same thing. Again, the overdraft protection on your checking account. You can spend that money but some of it you own, some of it you owe, right? Home equity lines of credit. And it's pushing us as individuals towards the model of high finance. All the guys on Wall Street where they're highly leveraged. Nobody really knows who owes what or it's kind of unclear. And of course we know how that all worked out for them and ultimately for us since we paid the price. Talk about gift cards from it. The wonderful world of gift cards. Another part of the E economy. Why they suck, yes. Well they can't be used universally unless it's an MX card. You have to go buy something at that store. Now hopefully the person who bought it for you knows you like the gap or iTunes or whatever but maybe you don't and you have to go to that store wherever it is. They expire quite often so if you don't use it with any year that money goes away, it goes back to the company. Some of them have fees every time you use it. It's great, so you buy something for $10 and you get to pay a 350 usage fee or whatever it is. The Phantom Revenue that the companies get from these type of things. Not just the sale, but the fees, the money that never gets spent. And also the psychological fact. How many of you all go in and you have a gift card and you spend exactly what the gift card's worth? You pay the dollar on it. Now you usually buy the gift card and then you go over by $10 so you use all the gift card up and buy another book or whatever it is. So they like that. They like that a lot. And of course many, many gift cards. How many of you all had gift cards expire? It was in your wallet, never got to Amazon. Well guess who gets that money? Yeah, it goes right back to the company. Actually they had it all along. They just never gave it back to you. A couple of reasons why they don't suck, which is also reasons why I think they suck, you can just buy a card and it's easy. You don't have to like in the old days, you had to think about what the person wanted and go shop for it and find it and just buy a card. Even in the supermarket now you can buy cards for Olive Garden, just you name it. And they are good for online purchases though. You can't really use cash for that anymore. So you know, you can buy your iTunes, Second Life, you're pouring whatever you want to get with your credit card. So they do have some uses. So you all may have noticed this industry campaign to vilify cash. You know, there's a lot of money. You know, everyone's on a line and someone pulls out a check or something and everything screeches to a halt and the guy's an idiot. He's holding everything up. And then someone pulls out a debit card and the line moves ahead. My question is always, is it really easier to pay with that than with cash if I give you a $20 bill and get changed than to strike my card, remember my pin, type it in, answer all the questions they ask you. You know, cash back, do you yes or no, approve this, is that really faster? I'd like to time that, see how it comes out. So the whole point is cards are cool, cash is uncool and get that little chunk of change off every transaction. You know, the ultimate harbinger of why this is a good money making thing is the Microsoft's obviously developing their own payment system because they know a very profitable business, good monopoly when they see it. Harbinger of the end times, the monopoly game now is you can see the little debit card, you don't longer get the funny money. Someone did tell me you can get the old funny money version but I think this is going to be more popular. You don't have all the bills, the $500 that you can steal from as the banker and so forth. It's all built into this little debit card machine. I also understand life is that way now and sort of so yeah, so our kids really aren't going to understand what this funny green paper is, what's all about, it's kind of nerdy. So here's our utopian version of society with no cash. No petty crime, right, you can't get mugged for your wallet, what not. Organized crime is going to be very hard to do because it's they can track it and the cash goes away. Terrorism of course, we'll track all those guys down when they're all having to use e-money and then we'll get rid of the IRS. We'll just file your tax return for you electronically and take it all out and no more filing, right, that's good. Well that's the utopian version. The dystopian version is government can follow you anywhere. So they know when you're buying gas, when you're checking into a hotel, where you're flying have a very accurate, if they ever want to investigate you have a very accurate sort of trail of where you've been. They can very easily with a subpoena look at kind of where you're going and what you're doing. Marketing companies of course know exactly what you like and don't like and how much money you make and of course the IRS doesn't go away. It just takes the money out. It makes it easier for them to take the money out and get your money. And organized crime becomes the banker of the underground providing facility for illegal transactions. They become the people who use cash. So kind of a dark, dark potential future there. Real quick and I'm going to speed this up. Got about five minutes left. Do you realize it is illegal to carry more than $10,000 in or out of the country without declaring it. So you cannot transport your own money in or out of the country without telling the government I am doing so. It's felony and they call it money laundering. Good for you. Good for you. Don't worry, I'm getting to an amount of money that will cover you. Cash transaction reports. Your bank is required to have been deputized by a number of laws to report suspicious transactions. So what's the suspicious transaction? Number one, anything over 10,000 gets automatically reported to the government. They know that you're dealing in cash. It also applies to other businesses. Casinos right here. Cardialships. Convenience stores and so forth. But in reality this is what the published amount is. They're actually tracking amounts in about the 3,000 range, maybe a little less. I think you're being smart and just getting out $3,000 or $4,000 depositing that cash. They are tracking that. They have software that will track it across multiple banks and branches and ultimately file a CTR on you. SARS. What's SARS? Well, it's not the Asian flu in this instance. It is a law that says even if it's not a specific amount and not required to if they think it's suspicious they need to file a suspicious activity report. So any reason they can file these things. The thing is that they get in trouble if something bad happens and they didn't file a SARS so they tend to err on the side of filing it. So just for whatever reason if they don't like the way you look kind of scruffy, they might want to file a SARS if you bring large amounts of cash in. So again, it's totally arbitrary. It's totally up to them. If you just took out a bunch of cash to come to Vegas and play with, that might trigger one. If you'd like to buy airline tickets with cash, which is really hard to do anymore that might trigger it. So you can get flagged for a lot of reasons. How many people heard about the Elliott Spitzer incident? How many people know how he got caught? It wasn't via a private investigator or wasn't via any kind of government task force. It was a lowly banker who noticed he was wire-transferring chunks of cash not 10,000, 3,000 or 5,000 at a time. Which is still a lot to pay for a prostitute, but he's a governor. And that's how he was caught. They filed a SARS. Someone noticed that it was going to this particular company and it was a call girl agency and he was laid low, no pun intended. So if it can happen to Elliott Spitzer and not necessarily over prostitutes, it can happen to you as well. Strong Crypto. Let's talk about it. Whenever they implement the next-gen system, it's probably going to be using Strong Crypto. I mean in some of the smart cards and so forth. It's a good thing to protect it. However, as we know, technology advances and what Strong Crypto today becomes tomorrow's weak or ridiculously weak crypto. And if any of you all went to the quantum computing demo here, I think it was one of the most significant demos at this show and a lot of people probably didn't appreciate it. But once quantum computing becomes a real thing, cryptography and all the things that we depend on today are going to change dramatically. So that could definitely put a kink in our system. Real quick, the last thing I want to talk about is why it could cause a problem for the national economy. Wells Fargo went down last year. A large portion of the fifth largest bank, so a lot of people couldn't use their cards. So imagine if five banks, if someone attacked top three banks and all of us here couldn't get gas, couldn't get on a plane, couldn't get a hotel, couldn't do anything. You're looking at potentially a massive panic if we can't be consumers like we've been trained to be. So that's sort of my Cassandra statement is that it could be a potential weakness in our national infrastructure and we really need to take a look at that. So I'm being called for time. If anyone wants to ask any questions, I'll go over to the Q&A room and we can continue there. But thank you for getting up so early and filling up the room. I really appreciate it.