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Maurice Levi of UBC’s Sauder School of Business says eliminating cash could save Canadians $17.9-billion annually.

Gene J. Puskar/AP

Just as Canadians get used to life without the penny, new analysis suggests it might be wise to scrap cold, hard cash all together.

A recent study from the Sauder School of Business at the University of British Columbia has found that eliminating physical currency could save Canadians $17.9-billion annually, while putting a serious dent in a variety of criminal enterprises.

Professor Maurice Levi, who led the study, looked at the government's most recent estimate that Canada's "underground economy" – anonymous cash transactions on which Canada Revenue Agency can't collect taxes – equates to 5.2 per cent of Canada's gross domestic product, or about $96-billion in 2011. The switch to purely electronic money would allow governments to trace every financial transaction made in the country, and know exactly who was involved. The largest financial benefit would come in the form of increased tax revenue from transactions that were formerly part of the underground economy and far fewer, but more efficient, tax evasion investigations.

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"This is where the technology is taking us, anyway," said Mr. Levi. "Cash is becoming less and less important. Most people are using debit cards, credit cards or another form of non-cash payment. Now is the time to be thinking about this."

It may seem like a far-fetched outcome, but Mr. Levi points out that in many developing countries such as Kenya, where digital infrastructure is expanding rapidly, the growing middle class has already opted for financial systems that don't require physical currency. A Nairobi local with a smartphone can avoid ever having to handle Kenyan shillings.

In Canada, one of the most important consequences would be a significant decrease in the financial resources needed to regulate and enforce Canada's thriving illicit drug market. Currently, the drug trade is estimated to cost Canada $8.2-billion annually when the costs of policing drug-related crime and the fiscal burden exerted by drug abuse on the health-care system are included. Though it's unlikely that getting rid of bills and coins would end the drug trade, it would certainly make life more difficult for criminals.

"You start to realize, if there's no cash, how are people going to settle up on the street? They certainly aren't going to put it on their credit card," said Mr. Levi.

It's unclear where a world without cash would leave Canadians without a bank account at a major institution, however. Aside from criminal elements, it is often society's most marginalized who depend on hard cash.

Despite the surprising results of the study, the bills under your mattress will stay valuable for the foreseeable future. The Bank of Canada and the Canadian Mint both profit from printing money, and competing interests in government will prolong any serious attempts to move away from physical money in the near future.

There are also predictable objections over what it would mean for personal liberties and privacy if any and all financial transactions, whether you're buying a house or a morning coffee, are recorded and available to federal and provincial governments.

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"There will always be concern when it comes to people's money," said Mr. Levi. "But this will happen eventually, it's just a matter of when and how."

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