Review Article Open Access

The Development of Electronic Money : Toward the privatization of money issue ?

Abstract

The development of electronic means of payment concerns the monetary authorities since these new forms of payment could challenge their ability to implement monetary policy efficiently. This would be the case if electronic money or e-money were a private form of money. In other words, if both banks and nonbanks were able to issue it without relying on base money. Based on a free banking framework, the paper shows that only pre-paid cards are similar to private notes such as those issued by free banks in the past. As a consequence, the control of the central bank over the quantity of money is not seriously undermined. Moreover to prevent this risk materializing, the European central bank now decrees that any new kind of e-money be issued only by commercial banks holding reserve requirements.

Nathalie Janson,Prof. J.M. Sahut)

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