Electronic Money and Its Development
Electronic Money Definition
Electronic money (e-money) is an electronic store of monetary value on a technical
device that may be widely used for making payments to undertakings other than the issuer
without necessarily involving bank accounts in the transaction, but acting as a prepaid
bearer instrument.
A New Means of Payment that is Reliable and Safe
Electronic money is being developed as a next-generation method of electronic
settlement. Electronic money is value information in electronic form that is backed by
monetary value in actual circulation and can be used as a means of payment. Naturally,
electronic money must be safe from forgery. A number of experiments are now being
conducted around the world to develop this electronic money.
There are two types of electronic money. One is the closed loop type of electronic
money, which is returned to the issuing institution (that is, converted into a deposit) each
time it is used. The other is the open loop type, which has transferability like bank notes
and coins. Most of the electronic money issued today is of the closed loop type. The only
open loop type of electronic money in practical use now is Mondex money.
By medium, electronic money can be classified into the IC card type and the network
type (software type). In France and several other countries, IC card-based electronic money
has already become a common, daily means of payment.
Digital currency payment systems have raised macroeconomic questions and concerns
regarding their impact on the money supply and governments' control over monetary
policy. In the U.S., research has shown, however, that the Federal Reserve system's control
of the money supply can be adjusted to reflect the change in the money demand, and as
such government officials consider the effect of digital currency on the monetary system to
be minimal (Blinder 1995). Nevertheless, proposed digital currency systems may affect the
monetary system in two possible ways: they may