-----BEGIN PGP SIGNED MESSAGE----- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SANDY SANDFORT Reply to: ssandfort@attmail.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C'punks, Michael C. Berch raised several issues about digital banking which I would like to address. Though his post was very thoughtful, it had some imbedded common misconceptions. He listed four concerns he had with digital banking--Security, Convenience, Privacy and Credit. He then wrote: No. 1, security, is a problem with anonymized, offshore, network banking. Today we rely on a combination of reputation and regulation . . . But in a *nonregulated* environment, there will have to be private deposit insurance which could easily have some bootstrap problems in building the initial market. [Emphasis added.] For the foreseeable future, all digital banking will be conducted from some national jurisdiction--just as with current offshore banks. Every world jurisdiction has some degree of regulation which is specifically aimed toward client protection. . . . I envision transactions ending up in two big buckets: card services and "cheque" services. . . . The card system, insecure at it is, is fast becoming universal; . . . I find it difficult to imagine large-scale displacement of institutions like VISA, MasterCard, and Amex, simply because they do what they do (provide instant POS credit authorization, guarantee merchants quick payment, etc.) very well. There is no need to displace current institutions. When a credit (or debit) card is issued by a bank in a privacy jurisdiction, all financial information about the card user must, by law, be kept secret. . . . Because of the degree to which strong financial privacy threatens government power (especially taxing power. . .) I can easily imagine that (1) banks doing business in or "touching" the US and most politically similar sovereignties will not be able to prevent themselves from disclosing identity and transaction information about their customers, and (2) people will probably be prohibited from dealing with these banks if they are in fact beyond the reach of legal process. Currently, there exist thousands of banks that offer strong financial privacy. They have little difficulty in preventing disclosure of customer information. Why should a digital bank be any different? No Western countries now prohibit their nationals from dealing with offshore banks. With the advent of strong encryption-mediated communications, anonymous remailers and, of course, digital banking, any such future prohibitions would be nearly impossible to enforce. The last issue Michael raised was credit. He wants a digital bank that will loan him money without knowing who he is. Don't hold your breath on this one. Those who wish to borrow money can probably expect that digital banks will want exactly the same personal and financial information that traditional banks require today. Such is the nature of business. S a n d y
Please send e-mail to: ssandfort@attmail.com <<<<<<
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Sandy