JG
This is a very real issue. To the extent that electronic money replaces currency (reduces the amount in circulation), it will cost the Treasury seigniorage--and the Government is acutely aware of this. Whether the beneficiaries are consumers, banks, or other issuers of digital cash will depend on the system.
pardon me but just for fun, would you mind debunking some conspiracy theories on this subject, since you seem to understand our system? there are a lot of people now claiming that the federal reserve is a system designed to slowly cause the entire US economy to go into debt to it via charging interest on the loaning of paper money. how do you address this? to me the idea that cybercurrency might escape possible manipulations and machinations that are happening in the real world currency markets is quite liberating. I would also expect to see some powerful interests try to fight it for this reason. p.s. if you are really you, thought you made some great points about the Unibomber on Peter Lawrence, and I also love your two books, Chaos and on Feynmann. keep up the great work.