Implications for Central Banks of the Development of Electronic Money

Recently, there has been considerable interest in the development of electronic money, a novel method for making retail payments electronically that is seen as a close substitute for cash. In August, the BIS published a report on the Security of Electronic Money prepared by the Committee on Payment and Settlement Systems and the Group of Computer Experts of the G-10 central banks. The current report "Implications for Central Banks of the Development of Electronic Money" has been prepared by BIS staff to provide a more general overview of the key features of electronic money and the main policy issues that arise for central banks as a result of the development of electronic money.

The report notes that there is a wide range of potential issues but focuses on those which are of particular interest to central banks. These issues include the security of electronic money schemes, legal issues, monetary policy and seigniorage, and implications for payment system and bank supervision. The report emphasises that, at this stage, the development of electronic money and the associated policy assessments are subject to considerable uncertainty that is likely to influence the nature and timing of any regulatory response. Designing an appropriate regulatory framework for electronic money involves balancing different objectives including the stability and financial integrity of the issuers, protection of consumers and the promotion of competition and innovation.

The features of electronic money and of the related policy issues and approaches discussed in the report are based on information on the various schemes in operation or under development currently available, and may change as these schemes evolve. The BIS intends, in co-operation with its member central banks, to continue to monitor closely the development of electronic money and to assist its member central banks in compiling and evaluating the relevant information regarding the development of these new payment products. The report will be available on the BIS Website "http://www.bis.org/" as from 9 a.m. on 18th November 1996.