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Looking forward : the role for government in regulating electronic cash

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  • Stacey L. Schreft

Abstract

With the year 2000 rapidly approaching, stored-value cards are already popular in some countries and are being introduced into the United States by private companies. Stored-value cards are one form of electronic cash—electronic substitutes for paper currency. Digital cash (also known as cybercash or ecash) is the other form of electronic cash coming into use today. It consists of bits and bytes in cyberspace and substitutes for paper currency in transactions made over the Internet.> Someday privately issued electronic cash may be a common means of payment in the United States. Looking forward to that day, government policymakers need to assess the impact these new forms of currency might ultimately have on the nation’s currency stock. If privately issued electronic cash, once commonplace, could threaten the long-standing safety, uniformity, and relative stability of the U.S. currency, then policy-makers must decide what, if any, forms of government intervention are appropriate.> Schreft argues there is a limited role for government in ensuring the quality of the nation’s currency when private issuance is allowed. She first describes the emerging forms of electronic cash and how they differ from today’s paper currency. She goes on to argue that the concern for policymakers is not that electronic cash is electronic, but rather that private firms are issuing it. Looking forward from the perspectives of economic theory and economic history, she explores the impact privately issued electronic cash might have on the nation’s currency and the potential role for government. Finally, she considers some specific regulatory alternatives for ensuring that the U.S. currency remains stable, safe, and uniform.

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Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (1997)
Issue (Month): Q IV ()
Pages: 59-84

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Handle: RePEc:fip:fedker:y:1997:i:qiv:p:59-84:n:v.82no.4

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Keywords: Payment systems ; Electronic funds transfers;

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Cited by:
  1. Sujit Chakravorti & Victor Lubasi, 2006. "Payment instrument choice: the case of prepaid cards," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 29-43.
  2. James Bullard & Bruce D. Smith, 2001. "The value of inside and outside money: expanded version," Working Papers 2001-011, Federal Reserve Bank of St. Louis.
  3. Jafarey, Saqib & Rupert, Peter, 2001. "Limited Commitment, Money, and Credit," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 22-58, July.
  4. Stacey L. Schreft, 2002. "Clicking with dollars : how consumers can pay for purchases from E-tailers," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 37-64.
  5. Holthausen, Cornelia & Monnet, Cyril, 2003. "Money and payments: a modern perspective," Working Paper Series 0245, European Central Bank.
  6. Li, Yiting, 2006. "Banks, private money, and government regulation," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2067-2083, November.
  7. Costas Azariadis & James Bullard & Bruce Smith, 2000. "Private and public circulating liabilities," Working Papers 2000-012, Federal Reserve Bank of St. Louis.
  8. James Bullard & Bruce D. Smith, 2001. "The value of inside and outside money," Working Papers 2000-027, Federal Reserve Bank of St. Louis.

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