Date: Mon, 13 Nov 1995 17:35:39 -0500 From: Dave Farber <farber@central.cis.upenn.edu> Subject: IP: cybercash! Holy Mackeral, Andy! To: interesting-people@eff.org (interesting-people mailing list)
From a letter in [My dog, I mean my software, ate this part of the msg -- gnu]
"Sir, Prof Alec Chrystal ... argues that because cash is unimportant, its replacement by smart cards will have little impact. However, cash is virtually the only kind of money issued by government (in the UK, more than 99 per cent). If a government cannot issue cash because e-money facilitates the use of another country's currency for domestic transactions, it will lose virtually all its seignorage. The government will have to issue some =A323 billion extra gilts and then pay about =A32 billion every year in= extra interest. "Moreover, cash circulates much more quickly than bank deposits (it has a high velocity-adjusted weight). Cash was used for almost 15 billion retail transactions in the UK in 1993, versus 4 billion for all other methods. So the currency in which retail transactions is priced is in practice determined by the denomination of cash. E-money would threaten this dominance, allowing people to stop using domestic currency completely (other than for paying taxes). "The importance of e-money replacing cash is greater than possible effects on exchange rates. Rather, it might make certain currencies to all intents and purposes disappear." Giles Keating head of global economics CS First Boston London, UK