At 05:30 AM 4/7/96 -0700, Wei Dai wrote:
I think you're right. There is no need for the issuer to pay explicit interest. The easiest way to eliminate signorage would be to steadily increase the value of each denomination of ecash. It would be kind of like a mutual fund that doesn't pay dividends. In fact, if the ecash is backed by a portfolio of investment securities and its value floats with the value of the portfolio, then it would be almost exactly like a mutual fund.
Of course, as Jonathan Wienke pointed out, the IRS would not be very happy about this. Then again, the IRS would not be happy with a lot of the technology discussed on this list.
Some more than others, huh? B^) FWIW, I think that there is no capital-gains-type tax on currency conversions. In other words, if I take dollars and buy yen today, and the interconvert rate changes and I convert back and make a "profit," that is not considered income. If that's the case, then ecash has an excellent precedent behind it to avoid any taxes on interest, especially if that interest is, in effect, paid by increasing the inherent value of the currency. And most of the "interest" will simply be the avoided inflation loss that would have otherwise occurred. Buying ecash may be equivalent to buying an absolutely non-inflating currency that the government can't manipulate. Jim Bell jimbell@pacifier.com