Electronic money

Ben Laurie ben at links.org
Thu Dec 4 16:31:09 GMT 2014

I'd be happy to have a chat to discuss any of this, btw...

On Mon Dec 01 2014 at 9:44:11 PM Francis Davey <fjmd1a at gmail.com> wrote:

> Apologies if this seems like a very stupid question (or series of
> questions) but this list struck me as being the best place to ask it.
> I'm doing some writing/teaching about legal aspects of money and payment
> systems on the internet (as a more general part of e-commerce). I'm trying
> to get my head around what systems of "electronic money" there are out
> there. Most of what I read is too sales-oriented for me to tell what is
> actually going on.
> Specifically I am interested in knowing if there are any systems of open
> circulation "electronic money" that don't involve smart cards or similar
> physical tokens.
> By "electronic money" I mean specifically money that is a liability on the
> issuer. I.e. there is an issuer and if you present your "copy" of the
> electronic money the issuer must present (or will present) you with some
> currency issued (say) by a sovereign state.
> By "open circulation", I mean one that allows parties to transfer the
> money between them without reference to the issuer or some other central
> body.

I think it is fundamental that if you want to prevent double spending you
have to have reference to some central body.

If you think Bitcoin avoids that then you should read my writings on
Bitcoin - because it doesn't. :-)

> Mondex was, as I understand it, an example of such a form of open
> circulation electronic money but relied on a physical token to make sure
> there was no double spending (forgive me if I have misunderstood this
> point).
> NB: please no criticism of whether it actually achieved these goals :-).
> Clearly cryptocurrencies openly circulate but they aren't "electronic
> money" (*) because they don't represent a liability on anyone.

It is interesting that you think this is what defines money. I was at a
think tank recently on the future of money, and it seems that money people
agree that there are three things you need:

1. Store of value
2. Unit of account
3. Medium of exchange

It seems to me that none of these _require_ someone to have a liability,
that's just one way to skin the cat...

BTW, some argued that Bitcoin failed on "store of value" by being too
volatile. But then, some fiat currencies have been pretty volatile in
living memory...

> Are there any examples of such things, or are all "electronic money"
> systems essentially reliant on smart cards or references back to an issuer?
> Ultimately I am trying to work out whether there is anything new (from a
> legal perspective).
> (*) There's a directive on "electronic money" and being a liability on the
> issuer is an essential (though not only) part of being electronic money.
> Bitcoin is not "electronic money" in that sense and so doesn't fall within
> all the regulatory rules of the same.
> --
> Francis Davey
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