December, 1997

Exploring Digital Cash

Questions Raised

1. In what ways will digital cash affect the U.S. money supply and what mechanisms should the federal government put in place to minimize any negative effects?

2. What technical standards, laws, or regulations should the federal government promote to responsibly address the potential increase in criminal activity while providing adequate protections for consumer privacy?

3. What is it about electronic money that poses a threat to one's privacy? Who will decide what is or is not private? Should this definition be incorporated into the development of any standards for digital money products and what (disinterested third) party will set those standards?

4. The most innovative products, specifically electronic cash-value systems for consumers, have been developed, tested and deployed first in Europe. (Mondex, Digicash.) In the United States, a more cautious approach is being taken, and this cautious and evolutionary approach seems to be the predominant model in the U.S. Consumer acceptance is always a tricky thing, but why is the United States, as a society or at the level of individual consumer preferences, more reluctant to make such changes quickly? Is this a valid observation? If so, are the roots of this reluctance economic, regulatory or cultural?
5. Is the development of a new field of products such as digital cash always more likely to be evolutionary than revolutionary? Is this more attributable to the financial or the technical aspects involved in the creation of payment systems for electronic commerce? Is a great deal of pragmatism perhaps necessary in modifying monetary systems?
6. What effect will the eventual introduction of successful micropayment schemes have on the content and use of the World Wide Web? Will this generally be the "end of an era" typified by widespread access to free material on most of the web? Or will it signal the opening of access (for some if not many "consumers" of the web) to a wide array of higher quality goods, and a step forward in resolving issues of payment and protection for intellectual property?
7. The consumer is also concerned with a fair price. This may be evident in familiar hard goods, but how will that be judged if one is buying information? Is some information better quality and who will determine that? Indeed, why should much of what is free on the Internet become a purchasable commodity? Will agencies arise (charging their own fee) to rate the worthiness of information? Will products develop that can make your search for information more cost-beneficial?

8. Some of the most innovative products rely on networks of merchants assembled to accept new forms of proprietary payment. At what point does a product gain wide enough acceptance to become a near-universal method of payment? Is it first incorporated into the services assembled by larger companies or alliances? Will the best product endure? Or will the simplest or most economical product endure?
9. Will the various corporate alliances backing different electronic payment methods be eventually reduced to just one or two groups, with one or two systems of e-commerce that are widely accepted? If so, what effect will this have on the "losing" corporate alliances? If not, how difficult will consumers, banks and merchants find it to deal with a variety of similar but incompatible products?
10. Are real savings possible for merchants and financial institutions through the use of electronic payment, especially in light of the technology (and technologists) needed to utilize such new systems?

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