Topics in electronic money

Abstract

There has been an increased interest on the electronification of payments systems in the last two decades in general and on electronic money (e-money) on particular in the last decade with increased computing power and decreased cost of communication. E-money did not only attract attention from the academicians but also from central bankers, financial supervisory authorities, treasuries, finance ministries and innovators and operators all around the world. The purpose of this thesis is fourfold. Firstly, it seeks to define and critically assess e-money including the expected functions, necessary features, its potentials and major implications for different sides of financial system. Secondly, it tries to present empirical evidence on the current stage of e-money technology with two case studies, namely Mondei and Digicash. Thirdly, it investigates the perception of e-money innovators and operators with an assumption that they have the power and influence on the future shape of e-money. This section includes the analysis of two European surveys and one additional comparative survey conducted in Miami, the US. Lastly, it studies the free banking implications of e-money covering the impact on monetary policy framework and monetary policy instruments including whether e-money should be regulated or not. The research finds that the current definitions given to the e-money phenomenon is incomplete and defines the necessary functions and features for the future success of e-money applications. It describes e-money trends in Europe and compares it to the US perception finding no serious differences although the FED and the ECB have different approaches to money. Another conclusion the thesis reached is that e-money may result in a new approach to central banking with a contestable framework through the synergies with free banking. Finally, e-money is not seen as a danger for the successful conduct of monetary policy and the thesis underlines that when it is `representative', regulation is possible whereas `independent'money issuance may manage to stay out of the coverage of conventional regulatory frameworks