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VII. Should government regulate electronic money?
As e-money has come to use during in 1990’s, the use of electronic money is commanding widespread interest, attention and concern. Technological breakthroughs and the increasing public acceptance of e- commerce as a way of life will no doubt lead to a large scale adoption of electronic money, in both retail trade and business to business transactions. This growth has coincided with serious discussions as to the role of the Government, why should we expert governments to concern themselves with e-money systems, and what are the goals for regulatory framework?
A. Why should governments regulate e-money?
As David Brich of Hyperion argues in this issue, electronic money raise major issues about public goods with governments, as guardians of the public interest, are bound to be concerned about.
First, there is a wide range of major concerns for macro-economic management and domestic economic policy. As we discussed in the second part, issuers of e-money are private companies, who need not be banks, they could just as easily be supermarkets or computer software companies. Private currency may not only make government lose seigniorage, it may also be out of control of the central bank, lead to inflation and affect government monetary policy. It is important that issuers of e-money should be regulated to ensure they operate on a sound and stable basis, and that the interests of consumers are protected.
Then, e-money could “reinforce ‘social exclusion’—systematic disadvantage for low-income groups in society”. As the affluent take advantage of new e-cash services, so the large population of “unbanked” low-income citizens could find that their reliance on old-fashioned folding money and coins places them at yet more disadvantage in gaining access to finance and to retail banking services. Government will wish to design in “social inclusion” from the outset in the development of e-money networks wherever feasible, so as to prevent or mitigate new forms of systematic social disadvantage arising.
Finally, like the issues raised from the whole commercial business on the Internet, the government has to consider the network problems, such as, the protection of commercial and personal privacy and transparent system design to counter fraud and money laundering.
B. What is the goal for a regulatory framework?
Many have argued that in e-money system the private sector should be the chief decision maker as regards to policy and operational issues and that the Government should only intervene when there is clear evidence of market failure or deficiencies. It is not only that private sector’s self-control will benefit the technology renovation and promote the whole global economy, but also that governments ‘move too slowly to keep up the technologies and the key innovators” . A related issue is the extent of the Government''s role to facilitate growth in this sector considering the need for a well-balanced regulatory framework to ensure the effective and secure issue and use of electronic money.
It is vehemently argued that the development of money ought not to be arrested by pre-mature over-restrictive regulation. The counter argument is however that legal certainty is needed for both consumer and investor confidence. Moreover, while e-money products may defy traditional strict categories of regulation, it is imperative to secure they do not become no-man’s land attracting predators seeking to act free of any form of regulation. The proper development of e-money by legitimate enterprises to meet genuine market needs will be hampered if they are used by others strictly as a means for law evasion. Therefore, some key goals for a regulatory framework, as Ian Christie and Duncan Goldie-Scot’s have suggested, include: measuring and controlling the money supply, avoiding negative impacts on public finances from tax evasion and loss of revenues, protecting personal and organizational privacy, securing public trust in e-money issuers, and preventing e-money from exacerbating social exclusion.
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