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CONSEQUENCES OF DIGITAL CASH What are the economic consequences of digital cash What are its implications from the view of economics In recent years several proposals for electronic cash have appeared in cyberspace In several cases forms of digital cash are already in use The economic consequences of these transactions have not yet been fully examined To some observers one important economic consequence of electronic cash is the free issue of private currency by commercial banks or other non-firms However if we look at the history of money it is not easy to make privately issued currency credible in the eyes and wallets of the public As long as there is competition between banks private banks will sometimes become bankrupt Nothing is more debilitating to the credibility of privately issued currency than bankruptcy The most important characteristic of digital cash is its transnationality Digital cash does not recognize national borders It is not controlled by any central bank of any nation state The unprecedented efficiency of international payments with digital cash may indeed increase the instability of the global monetary system This efficiency indeed may lead to conflicts between digital cash providers and users and the central banks of nation states There are over a dozen proposals for electronic payment systems on the Internet To briefly understand these systems lets us examine a few issues by trying to pay a bill via the Internet with a credit card In comparison to using cash in the real world transmitting a credit card number over the Internet might lead to the following difficulties First there is the entire question of security Credit card numbers may be viewed by unauthorized individuals because the Internet is an open system In the real world there are a number of means to minimize fraud A customer using a credit card will usually opt to carry out transactions at trustworthy or familiar facilities stores and markets
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