Looking forward : the role for government in regulating electronic cash

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.