By getting rid of cash, nations around the world might be able to significantly reduce organized crime and political terrorism since those activities are heavily reliant on easy accessibility to dollars, euros, pounds sterling, yen and other paper currencies.

In a recent op-ed piece in The New York Times, Jonathan Lipow, associate professor of economics at the Defense Resource Management Institute at the Naval Postgraduate School, suggests a type of smart-card technology be used in place of cash which would permit consumers to transfer money from a buyer's card to a seller's card. These cards would somehow maintain records of all transactions that could also be downloaded onto centralized computers. Consequently, any electronic payments by criminals or terrorists would create a paper trail that might be easily detected.

Lipow explained in the piece how organized crime could not survive without cash, particularly bills of large denominations, citing that in 1969 the U.S. Treasury discontinued the issuance of $500, $1,000, $5,000 and $10,000 bills specifically to impede crime syndicates — the only entities that were still using such large bills after the introduction of electronic money transfers.

After all, a briefcase filled with hundreds of $500-bills is more manageable than the wheelbarrow filled with thousands of $1s, $5s and $10s.

This topic arose recently when the European Union introduced the 500-euro note which is often called the “Bin Laden” given how high-denomination bills make it a lot easier for terrorists to operate.

Lipow indicated how during the early years of the U.S. military occupation of Iraq, U.S. officials distributed about $19 billion in physical money to Iraqi suppliers and contractors.

But the military has gradually realized that the anonymity of cash makes it easy for terrorists and insurgents to smuggle in money and make purchases without a trace, he wrote. That’s why for the past few years the military has been striving to replace its cash transactions with electronic fund transfers and debit card payments in the hopes of achieving a 'cashless battlefield.'

Lipow wants to extend this concept to the world of criminal syndicates. For example, he noted that raids on drug traffickers in Mexico frequently unearth millions of dollars in cash -- including one raid that turned up more than $200 million, mostly in $100 bills.

So, why not eliminate the use of physical cash worldwide — not just a “cashless battlefield” but a “cashless economy”? he proposed.

A cashless economy could be a realistic objective, Lipow suggests, as long as the costs of making transaction was low enough so that even the smallest payments could be done efficiently.

For example, a Twitter application known as TwitPay allows you to use your cellphone and a PayPal account to transfer money, he said. In Kenya, a mobile banking system known as M-Pesa allows six million people to execute small payments using [Short Message Service] SMS messages.

However, cellular-based systems would be unsuitable as a complete replacement for physical money, he added, particularly in the developing world.

Rather, he suggests the use of smart cards with biometric security features, like the Universal Electronic Payments System.

In South Africa, the technology company Net1 now distributes social welfare grants to almost four million people, he wrote.

It’s simple: with a battery-operated, point-of-sale device akin to a credit-card terminal, money is transferred from one person’s card to another; during the process, the cards download and record each other’s transaction records. Every few days, employees from the payments system head out to the villages and make their own money transfers, downloading the transaction histories of the cards they come into contact with, which contain the histories of the cards they interacted with, and so on. That data is then downloaded into the company’s mainframe, as a way of monitoring the flow of funds across the cards.

Best of all, he added, the system can function offline and off the power grid, providing a secure means of payment under all conditions and without any geographic limitations.

And the incremental cost of executing a transaction via this system is essentially zero, he noted. It is a promising model for the global economy.

In a subsequent TV appearance on CNBC, Lipow estimated that perhaps half of the nearly $1-trillion in U.S. dollars floating around the world are in the hands of criminals and terrorists, i.e., functioning in illegal and illicit activity. Indeed, despite fears of an ever-depreciating dollar due to the Federal Reserve's money-printing, the greenback remains the world's most trusted and valid currency.

Thus, a cashless economy, where every transaction would be recorded, would pose serious, perhaps insurmountable, obstacles for criminals and terrorists.

To help move to a global cashless economy, the Obama administration should push for an international agreement to eliminate the largest-denomination bills, Lipow suggested in The Times.

”Additionally, the U.S. Agency for International Development could make the promotion of electronic payments systems in developing countries one of its strategic objectives, much as the American military has done in Iraq and Afghanistan.

Indeed, as Lipow pointed out, a 2002 survey by the Organization for Economic Cooperation and Development concluded that “money’s destiny is to become digital.