Regulatory Issues in Electronic Money: A Legal-Economics Analysis
AbstractIn this paper we examine regulatory issues relating to electronic money. The discussion proceeds along three main lines. Firstly, the focus of attention on the potential risks to the financial system is typically on the systemic risk arising from the payments system. Since issuers of electronic money automatically become part of the payments system, we consider if the arguments relating to systemic risk originating in the payments system apply in the case of electronic money. Secondly, we examine the sharp divergence in regulatory approaches between the US and the EU, and suggest that a useful way of reconciling this divergence is to note the existence of a tradeoff between the efficiency of the financial system and the amount of risk assumed by the public sector. This means that there is not necessarily a 'correct' answer to the question of the desirability of regulation. Thirdly, technological advances and financial innovations have made it easier for firms to engage in regulatory arbitrage. Competitive pressures may have encouraged financial centres to engage in competitive deregulation, resulting in a less than socially optimal level of regulation overall. It is therefore important that national authorities coordinate and harmonise their regulatory policies.
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Bibliographic InfoPaper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp98-02.
Length: 31 pages
Date of creation: 1998
Date of revision:
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REGULATION ; ELECTRONIC MONEY ; FINANCIAL SYSTEMS;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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