Electronic money

Nicholas Bohm nbohm at ernest.net
Wed Dec 3 11:12:28 GMT 2014

On 02/12/2014 21:39, Mark Lomas wrote:
> On 2 December 2014 at 20:43, Francis Davey <fjmd1a at gmail.com
> <mailto:fjmd1a at gmail.com>> wrote:
>     ... [re legal tender]
>     I'm inclined to favour something along the lines of Modern
>     Monetary Theory which suggests that the large tax liabilities owed
>     to the UK government which are payable in Stirling are more
>     important than any mere convention. But, as I said, this isn't
>     really the place to argue it.
>     ...
> Funnily enough only coins are legal tender in Stirling [true but :-)
> ]. No banknote is legal tender in Scotland.
> *Sterling *banknotes, £5, £10, £20, and £50, are legal tender in
> England and Wales, but not Scotland or Northern Ireland.
> The term Legal Tender is more historic than practical. The Royal Mint
> gives the following example: a £5 Crown is legal tender, meaning that
> it will be accepted by a court in settlement of a debt, but banks are
> not obliged to accept them.
> I think that Francis was correct to suggest that many of the schemes
> he asked about aren't 'electronic money' in the sense defined in the
> Directive. They more closely resemble what bankers call a 'coupon'.

"Legal tender" refers to whatever can be relied on in court as
foundation for the defence of tender.  That defence is a defence to a
claim on a debt, and is available if the defendant can show that he
offered the creditor, by way of discharging the debt, something
constituting "legal tender", but the creditor refused to accept it. 
Where the defence is available, the debt is treated as having been
discharged by the tender and refusal, and cannot be enforced.

I don't suppose it happens often, most creditors not being foolish
enough to turn away payment; but it's pretty practical if it happens.

The defence seems to assume a physical presentation of the tendered
payment which the creditor has a practical opportunity of taking.  That
would make it difficult to achieve with electronic money.  Perhaps if
electronic money comes into common use, the defence will adapt to it.

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