Electronic money

Francis Davey fjmd1a at gmail.com
Mon Dec 1 23:26:05 GMT 2014

2014-12-01 22:04 GMT+00:00 Phoebe Queen <foibey at gmail.com>:

> I think for that to happen there'd have to be an electronic currency
> backed by a sovereign state, and I don't believe such a thing exists.
Not necessarily. Privately issued tokens which act as negotiable
instruments and are liabilities on the issuer are not uncommon. Indeed I am
about to go to Scotland where there are 3 banks that issue bank notes all
of which are exactly as described. But of course they are physical.

> What does exist are various cryptographic token systems being exchanged as
> units of de facto commodity value in lieu of state currency. The exchange
> markets for them are naturally quite unstable - there's nothing material
> they're reliably exchangeable for in a large enough scale to stabilise
> their value (compared with eg USD which is first tied down by the need for
> half a billion people to pay their taxes in it, and secondly in the sense
> that it's the default global currency for valuing oil and many other goods).
Right. In several useful sense of the word such systems (like Bitcoin) are
not "money" (though of course there are many ways to define it). For my
purposes they certainly aren't, because they represent no obligation on
anyone. I could hold bitcoins and everyone else involved in the system
could decide to stop. I would have no recourse against anyone in that
situation. I am well aware of *those* sorts of things.

But since there is an elaborate system of regulation of "electronic money"
I was trying to find out if it actually existed in fully dematerialised
form in open circulation.

> PS: I think there are many sovereign currencies which aren't liabilities
> on the issuer, through a variety of other money creation mechanisms.
Money theorists argue about this. The pound Stirling doesn't really
represent a liability on the UK state, although it has value principlally
because the UK state has an enormous tax bill all of which it will reliably
accept in Stirling (so it has some use). Also Stirling is always
exchangeable for legal tender and legal tender can, ultimately, be used to
defend against an action for debt.

I am happy to assume that pounds are not liabilities on the UK.
Francis Davey
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