A cashless economy gives the government absolute control over every penny in society. They can add more virtual cash, retract virtual cash, in the economy from a keyboard.
Also, of course, they would have the ability to track every transaction made in a State, including private transactions. Birthday gifts, tips, help your brother out with rent, win the door prize at a club meeting, that is all now traceable, taxable, income.
But more than all that, it gives government the ability to directly take, at any moment, whatever funds they feel you owe them, or whatever they feel they need. You can no longer have an emergency fund in a safe. Everything is online and is, more or less, at the disposal of the government.
How are you going to be able to hire people or purchase things under the table if the government controls and monitors every penny that is out there?
Should this succeed, it would be the most powerful instrument any government has every known in history. It would be a form of absolute control over every single aspect of a population.