Jon Neuleib
If it is true that money
makes the world go around, does the world spin faster when money can circle the
globe in a fraction of a second?
“Money” itself comes in multiple such as coins or paper, negotiable
bonds, and now bits of data residing on computer servers or pulses of light
flowing through a fiber optic network . Changes in currency are causing ripple
effects in everything from crime to the stability of governments.[1] One of the most significant challenges will
come from the move to electronic currency.
Electronic currency is the attempt to create an electronic and networked
system “modeled after our paper money system.”[2] This note will explore the nature of electronic
currency and the challenges it presents for lawmakers. Electronic currency has economic advantages,
but it also has disadvantages including the risks of increased money
laundering, fraud and more difficult enforcement actions for governments.
Electronic currency combines
aspects of traditional tangible currency, like paper and coins, with the
technological advancements of debit cards and electronic networks. From traditional currency come the aspects
of anonymity and ease of use. From the
more technologically advanced side come lightning fast transfers and limitless
size. This note is not simply an
examination of electronic currency, however.
It argues for national backing of electronic currency by the United
States government. To examine the
plausibility and advantages of this approach it will be necessary to look at
currency in the context of legal, technological and political changes. Part One is an overview of the changing
nature of currency as new technologies interact with money. Part Two examines the current regulatory
approaches that are being taken to control electronic currency
transactions. Part Three is a
comparison between private electronic currencies and a nationally backed
“public” currency. Parts Four and Five
apply the advantages of a nationally backed electronic currency to the areas of
fraud and money laundering, respectively.
The final segment, Part Six, looks at the far-reaching implications of
electronic currencies for nation-states themselves.
The history of currency is
generally seen as a progression from barter to natural objects (such as shells
or cattle), to coin, to paper, to electronic form.[3] One of the critical junctures in the history
of currency is when the notes or coins stop being a representation of some
other, inherently valuable object such as gold. This form of currency is referred to as fiat money.[4] A currency is virtual as soon as it stops
being tied to a material object backing its worth. This step occurs well before the introduction of an electronic
payment system. Currency has been a technology for representing absent value
for decades in this country.[5] Modern currencies have their values
determined by an interaction of political and market forces. Using law to control currency has been beset
with problems that can only be avoided with smart economic and legal
choices. History shows that not all
governments have been up to this task with almost all nations having had to abandon
their currencies at some point in the 20th Century.[6] The move to an electronic currency presents
a new challenge that demands an understanding of law, technology and economics.
Electronic currency is an
inexact term used to describe an electronic transaction that functions more
like a cash exchange and less like a credit card charge.[7] The term encompasses everything from stored
value debit cards, online bill payment, e-coins, and virtual banking to the
electronic brokerage systems of international currency traders.[8] The difference between electronic currency
and other forms of electronic payment is that the issuer backs currency. There is no need for a recipient of the
funds to trust the person with whom they are transacting as long as they trust
the issuer. With cash, people trust the
government and there is no need for them to know the identity of the person
paying them. Electronic currency is a
technology that promises to bring this level of ease of use and anonymity to
cashless transactions whether they happen on the internet or face-to-face. A transaction with electronic currency
places real (if intangible) funds into a seller’s account whereas an electronic
payment system places only a promise to pay in that account.[9] The technological leap of electronic
currency is that it breaks the dependent relationship between the buyer and
seller.
Currency has always been a
technology, but it is a technology controlled and created by laws.[10] It is a tool used to mark, move, and
maintain value.[11] Modern currencies, whether electronic or not,
do not have inherent values, but rather represent a claim against the
institution that issued the note.[12] The move to electronic currency is not money
becoming technology, but rather a
moment at which money may reveal itself as
technology. Currency stores value
whether it is in the form of cash in a wallet or a microchip on a plastic
card. What is remarkable about our
current system is that people have very few qualms about the value of the
pieces of paper that they carry with them.
Currency is, in some ways, a technology of faith. People have faith in the government and that
translates into faith in the value of currency. In a nation like the United States, that faith has not been
tested. Electronic currency provides a
technological innovation that may require people to have faith in companies and
other private actors rather than the government.
In the contemporary structure
of the nation-state, currency is a construct of the state.[13] Money is not so much controlled by law, as created
by it. At the simplest level, the
actual ability to create physical currency is function of law.[14] At the more theoretical level, a
government’s ability to control fiscal and monetary policy is also a function
of law.[15] The role of nation-states in the creation of
currency is currently taken for granted, but the history of the 19th
Century in this country shows that a nationally, centrally controlled currency
is not inevitable, nor a teleological certainty.[16] In the antebellum period, currency could be
issued by almost anyone and there were 8,000 different state banks issuing
currencies in 1860.[17] Laws that change the status of currency have
eventually led to changes in the political structures that created those laws
themselves.[18] Forms of electronic currency in the hands of
private actors such as brokerage houses, credit card companies, banks or Paypal
are all still traded in dollar denominations.
The value assigned to the unit of currency has much more to do with the
U.S. government’s policies than Citibank’s.
Moving to a nationally backed electronic currency would not take the
money out of these private actors’ hands, but it would increase the certainty
about the value and trustworthiness of funds traded electronically.
CURRENT
REGULATORY SCHEMES
Current regulatory schemes
are marked by a reluctance to interfere with the technological development of
the private sector.[19] There is a widely held belief that
technology must mature in the private sector, first, before it is subjected to
regulation.[20] Current
attempts to write laws controlling electronic currency seek to regulate its
development in the private sector by using traditional banking and commercial
paper approaches.[21] The controls that have been implemented and
those that are being discussed will not create a true electronic currency, but
will merely provide electronic versions of secured transactions.[22]
Although this avoids stifling the private sector, it is unclear that it will
provide the confidence that consumers need to trust the system and make it a
robust market of users and providers.
With companies such as Microsoft looking to privatize the means of
exchange based on these regulations, it is unclear that consumers will be
well-served by the wait-and-see approach to the regulation of electronic
currency.[23] In Part Six, this note considers whether
nation-states could lose the present level of control that they have over
currencies. While that is not an
inevitable result, the present course of regulation will lead to competing
private currencies and not the adoption of a nationally backed electronic
currency.
Implementing new laws
governing electronic currency demands that lawmakers understand the nature of
the challenge they are facing.[24] An early look at the future of electronic
currency in the infancy of the internet listed a long shopping list of
electronic currency attributes: security, reliability, scalability, anonymity,
acceptability, customer base, flexibility, convertibility, efficiency, ease of
integration, and ease of use.[25] This rather exhaustive list describes both
the factors necessary for effective implementation and those required by
consumers to adopt a new system.[26] These factors describe an ideal system and
the current use of credit cards over the internet suggests that consumers are
willing to undertake transactions without all of these factors in place.[27] Additionally, the guidelines that policy
makers are using are considerably less stringent than those advocated by
academic writers.[28]
There have been some very
concrete efforts to regulate electronic currency, but their implementation has
been neither uniform nor far-reaching.[29] There have been essentially three areas of
development in the regulation of electronic currency. First, there have been federal efforts of to control money
laundering and illegal transfers such as those forwarded by the Treasury
Department’s Financial Enforcement Network.[30] Second, there have been efforts by states
(and the uniform law committees who attempt to influence state legislatures).[31] These efforts have been marked by a
recognition that applying old laws to new currency forms is mistake, but also
that state legislatures may not know enough about the new forms to craft
appropriate laws.[32] State efforts have largely been an attempt
to adapt old concerns about secured transactions and commercial paper to the
new realm of electronic commerce through initiatives such as digital signature
acts.[33] The final area of legal development has been
at the transnational and global level.
These have included both domestic attempts to shape the global debate
and truly international attempts to confront the implications of electronic
currency.[34]
It is this third area, the transnational and global space, in which the most interesting changes in the nature of currency are going to take place.[35] The critical question to be asked at this juncture is whether there is going to be a fundamental disassociation between the nation-state and currency.[36] Will the medium of exchange that the citizens of a country use to buy goods and services be permanently unbound from the power of the state? At one level, this question seems absurd. As stated earlier, currencies themselves are the creation of the entities that produce them.[37] The U.S. dollar is a product of the laws of the United States.[38] Without those laws, without the backing of the government, the paper in our wallets or the photons describing our balances on an ATM screen, lose their meaning. When they lose their meaning, of course, they also lose their value. Recent catastrophic currency events such as the ongoing crisis in Argentina suggest that currencies, even in their present state, are perfectly capable of outrunning the laws meant to govern them.[39] The movement to electronic currencies presents new risks and possible rewards, however. One of the peculiarities of the present system is that private sector companies such as Microsoft are the patenting the exchanges through which electronic currencies flow.[40] We have to ask ourselves whether the technology of currency is capable of outstripping the capacity of the technology of the law to control it.
This essay suggests a very particular form for electronic
currency. A nationally backed
electronic currency would function in the following way. Each unit of currency would have a unique
identifier attached to it. This
identifier would work just as the current serial numbers do on paper
currency. In the present system of
electronic transfers, there is an identifier, but it is a mark of the
transaction itself or a digital signature.[41] The nationally backed electronic currency
would be exchanged freely for all debts public and private and the government
would not have to be aware of any transactions until there was suspicion of
fraud or money laundering. When there
was a reasonable suspicion about the path that a particular unit of currency
had taken, law enforcement would be able to track it through either an embedded
audit trail or a series of nodes in the system such as a bank’s servers.
The units of currency could be fungible in this system
with each combination of units being a virtual redemption. As an example, imagine a person making their
mortgage payment. The person has received
(say from salary, a rebate on a toaster, and the balance of their Las Vegas
hotel account) currency units XJH64827364, KJG84936586, and JUR19573057. The sum total of these three units is $2000,
the amount of the mortgage payment. The
person would have the option of forwarding the three units themselves to the
mortgage holder as satisfaction of the debt or creating a new unit which we can
call ZZZ1111222. The choice would be up
to the individual, but the if the person converted the other currency units
into a $2000 unit called ZZZ11112222, the previous three would be “redeemed” by
the government and unit ZZZ11112222 would be “issued.”[42] This process would stop the proliferation of
currency units and provide a means to keep track of the currency as it went
through various hands. If privacy were
the utmost concern, the person could pass on the three units that had been
issued to someone else, but if convenience was the concern, the person could
acquire a freshly minted currency unit, ZZZ11112222.
We are, realistically, at a
crossroads that will determine the relationship between currency and the
nation-state.[43] The risk is that regulations governing
banking, money laundering, monetary and fiscal policy, and commerce will not be
up to the task of controlling electronic currency.[44] It is not enough to suggest that the
particular policies themselves are improper.
It is the terms of the current debate itself that are inadequate. Legislatures are focusing on issues like
digital signature initiatives that, while vital and novel, are somewhat beside
the point.[45] Working on digital signature initiatives is
laudable, but unless there is a fundamental shift in our understanding of the
way that electronic currency may escape the control of the nation-state, it is
just rearranging deck chairs on the Titanic.
The only solution is to have national backing for electronic
currency. This proposal is not for a
nationally backed electronic currency alongside private ones. A true nationally backed electronic currency
would supplant the private forms just as Federal Reserve notes are the sole
legal tender circulating as cash in the tangible world.
A nationally backed
electronic currency differs from a private one because the government is the
issuer of the currency.[46] Private electronic transfers are currently
common as credit card purchases, debit and stored value cards, and wire
transfers.[47] These are not properly speaking currencies.[48] Currency differs from a draft or a note
because the issuer does not have to redeem the “paper” for it to be turned into
something of value.[49] The currency holds its value and circulates
without ever having to return to the issuer for redemption.[50] For electronic transfers, this is a novel
concept because currently, electronic payments have to be moved back and forth
between different forms, such as credit card charges and Paypal transfers, to
be used by the recipient.[51] Electronic currency would be usable by the
recipient and could be passed to a new recipient without any privity, liability
or contact with the previous holder.[52]
For
private electronic currencies, the recipient has to trust both the issuer and
the person from whom the payment is received.[53] The first advantage of a nationally backed
electronic currency is that the payment would ultimately be backed by the U.S.
government. Having U.S. backing for an
electronic currency would increase the confidence, security, convertibility,
acceptance and widespread use of electronic currency.[54] There are risks to being the first mover in
a space like electronic currency and the size and stability of the government
insures a more stable introduction than could be gained from the private
sector. The advantages of having a
nationally backed electronic currency go beyond the confidence that would be
instilled in the currency. There are
widespread concerns about fraud and money laundering through electronic
currency and placing the government as the ultimate issuer would reduce these
risks.
The disadvantages of a
nationally backed electronic currency are: the stifling of innovation and
competition in the private sector; and, the increased surveillance that the
government would have over electronic currency. Having government control the issuance of the currency and
leaving the type and structures of the transfer up to the private sector means
that there could still be innovation from the private sector. The government essentially serves as the
backstop for final redemption, but because it is currency, it could be freely
traded without having to return to the government at each transfer.[55] The risks that the government would intrude
on the privacy of individuals is a real threat, but one that does not account
for the law’s ability to constrain improper government action.[56] The government would only have access to the
path of the currency when it was redeemed.
Just because the information
was electronic, there is no reason to think that there would be a decrease in
the current protections stemming from probable cause and the illegality of
warrantless searches. The choices for
electronic currency are not between privacy and scrutiny. The choices are between the government and
private actors. Government law
enforcement agents would still be able to subpoena bank records from the
private sector, but there is no guarantee of what the private actor could do
with a person’s information. The likely
solution would be a law mandating people’s financial privacy. Thus, the protection for financial
information linked to electronic currency will be a function of law in either
scenario. The choices between allowing
the government or Microsoft to have control of your financial information may
not be palatable, but the one has constitutional guarantees attached while the
other does not. There are certainly
risks to privacy with electronic currency, but the comparison of the two
systems show the advantages attached to government backing.
On
the one hand, the impersonal and ephemeral nature of electronic commerce makes
the area seem ripe for fraudulent activity.[57] On the other hand, the mediated nature of
electronic currency makes it eminently traceable. Whether this is an advantage or not, depends on a careful
comparison between the present state of electronic commerce and what the
landscape would be like with a nationally backed electronic currency.
Would
you value an electronic transfer of $100 differently than you would the handing
over of a piece of paper with a picture of Benjamin Franklin on it? There is something else at work besides the
inherent trust we have in Franklin’s balding head and dubious expression. If there is some risk to the electronic
transfer or some disutility in the form, then one might value it at a
discount. It might take $102 in
electronic currency to make us part with the same quantity of goods that we
would for $100 in paper currency. There
are two possibilities for this reluctance.
One would be the heightened transaction cost associated with the
electronic form and the other would be a concern about the security of the
transaction.[58]
There
needs to be a distinction between electronic transfers at this point and
electronic currency.[59] Currently, the cost of credit card
transactions (the most prevalent form of present electronic exchange) creates a
certain friction in electronic exchanges.[60] A person attempting to use the money that
arises from an electronic exchange has to move the funds between a number of
different accounts, or states of existence, to actually spend it.[61] The advantage of electronic currency is
that, in its truest form, it would not require these additional transactions.[62] Ideally, the difference between an
electronic transfer and electronic currency is that “currency” is immediately
useable while a currency denominated value in an electronic account, is not.[63] The difference between currency and a
transfer is that currency can be used without returning to the issuer for
redemption.[64] It can be used by the recipient without
having to return to the original issuer.[65] As the ubiquity of an electronic currency
spreads, the transaction problems would decrease and the costs would follow.[66]
The
fear of fraud would still be real, no matter how many people were using an
electronic currency.[67] The intangibility of electronic currency
creates a certain distrust that is unlikely to be dispelled without assurances
from a third party. There are
essentially two types of fraud: An exchange in which one party uses something
other than legitimate currency and the improper removal of funds from an
account. These can be analogized to
someone using counterfeit paper currency and a pickpocket. The state of the law is currently capable of
dealing with either of these occurrences.[68] The current drafts of the Uniform Money
Services Act, the Uniform Commercial Code and the developments surrounding the
Uniform Computer Information Transactions Act all account for the need to
support a cause of action when a party has been defrauded in an electronic
transaction. [69]
The
state of the debate surrounding the various uniform codes and E-Sign is largely
beside the point for electronic currency.[70] The real change comes from the altered
status of electronic transactions when they are trading in a nationally backed
electronic currency. Under the present
system, although there may be jurisdictional issues, the ability to file suit
against someone who has defrauded another party is not seriously in contention.[71] What has not been fully explored, however,
are the advantages in tracing that come with an electronic currency. Electronic currency would have to reside on
servers and hard drives and as with email, its trail would never truly
disappear. The Basel Committee on
international banking practices has urged that, “the existence of clear audit
trails for all e-banking transactions should be ensured and all measures to
preserve confidentiality of key e-banking information should be appropriate
with the sensitivity of such information.”[72] Obviously, governments have an interest in
making sure that transactions do not escape the scrutiny of law enforcement
altogether. The balancing factor is
whether this becomes an intrusion on the privacy of the individual.
Commentators
have debated the importance of anonymity to electronic currency.[73] The argument is that anonymity is necessary
for people to be able to trust the medium of exchange.[74] Concerns about the anonymity of electronic
currency result from misconstruing the relationship between law and currency.[75] Currency is created as a function of law,
but that does not mean that the government is a monolithic structure incapable
of formulating objects and, at the same time, producing the means to limit
itself. A nationally backed currency
does not have to devolve into a “big brother” scenario with the government
tracking every transaction.[76] Law is flexible enough for an entity both to
create currency and, at the same time, hold itself in check. To disbelieve this component is to suggest a
disbelief in the ability of government to limit itself in general. That may be a persuasive argument for some
aspects of the political spectrum, but it does not hold up in actual practice.
The government currently has
both authority and proper restrictions on that authority in the area of
banking.[77] The banking industry is highly regulated at
the federal level, but there are functional constraints on law enforcement’s
use of the information gained through regulatory authority. In
Breakey v. Inspector General of U.S. Dept. of Agriculture, the court held
that there was no legitimate law enforcement purpose for a subpoena.[78] The Office of the Inspector General sought
bank records regarding the flow of funds to a housing project and the court
determined that the initial explanation given for the subpoena was inadequate.[79] The defendant in the case was claiming the
defense available to it under the Right to Financial Privacy Act.[80] Conversely, in Donovan v. U.A. Local 38 Plumbers and Pipe Trades Pension Fund of San
Francisco, the court held that there was a legitimate law enforcement
purpose.[81] The courts function so that individuals are
not harmed by the regulatory power of the state. It is the law itself that creates both the law enforcement
mechanism and the protection from it.[82] Just as the Uniform Commercial Code creates
a cause of action for fraud when using a credit card or writing a check, so
laws could be formulated to protect from fraud with a nationally backed
currency.
Finally,
it may be important for the government to issue electronic currency because the
choice is not truly one between government oppression and anonymity. The Federal Trade Commission has argued that
anonymity is at risk in the present system because the companies that have the
information are not adequately protecting it.[83] The choice is not whether information is known about your financial transactions, but
rather, who it is that is holding the information.[84] The risks of anonymity are greater than the
advantages to pseudo-anonymity.[85] In the status quo, government has the
ability to trace financial transactions, but it is an arduous process that
wastes resources and creates exploitable gaps.[86] We have to trust the law is also robust
enough to curtail any abuses that the government might be tempted to undertake
in the name of law enforcement.
Traditional
money laundering schemes move money into a legitimate transaction from an
illegal one.[87] The money enters the laundering scheme as
cash from illegal activity.[88] The risk with an electronic currency is that
money laundering becomes quite easy and undetectable.[89] The advantage of a nationally-backed
electronic currency is that the enforcement of money laundering laws becomes
slightly easier. The reason to be
concerned about money laundering itself is that it is a nexus point for all
organized criminal activities.[90] Electronic currency has obvious advantages
for cyberlaunderers.[91] It is fast, efficient and much less likely
to lead to official attention than carrying a suitcase full of twenty dollar
bills through an airport.[92] What needs to be found is a way to allow
legitimate use of the electronic transfer of funds and at the same time, not
create an ironclad resource for money launderers.[93]
The US anti-money laundering
schemes involve enforcement across numerous levels of government[94] The traditional path of laundered money is
from an illegal activity to a set of off-shore accounts that are difficult for
U.S. authorities to trace.[95] Money is then “layered” by splitting it up
into smaller amounts to both hide the trail and escape laws governing
notification.[96] Merchants and banks have to notify the U.S.
government when a transaction involves $10,000, or more, in cash.[97] Breaking up a single transaction so that it
is a series of layered transactions worth less than $10,000 each, is now
illegal (even to aid and abet) under the Money Laundering Control Act of 1986[98]
The risk with electronic
currency is that, beyond the advances in speed and security already available
to money launderers, the ability to transfer funds without leaving a paper
trail is getting easier and more accessible.[99] Currently, direct transfers between stored
value cards are possible and this transaction eliminates any paper trail.[100] A stored value card is a credit card-sized
piece of plastic with a computer chip in it that serves as an electronic
ledger.[101] These cards are already in widespread use
for everything from paying for your copies at Kinko’s to vending machines.[102] At this point, however, the cards are
largely tied to a single merchant and cannot be used as a true electronic
currency.[103] Unless a drug trafficker has a lot of copies
to make, stored value cards are not yet the weapon of choice. That may soon change.[104] Banks are increasingly getting involved with
the distribution of stored value cards and their acceptance is growing.[105]
For a money launderer to use
the stored value card exchange, all that would be necessary is a merchant who
was willing to move the funds from one card to another.[106] Additionally, a stored value card could be a
repository for numerous cash deposits and then that card be taken physically
off-shore quite easily.[107] The movement of funds between stored value
cards could be achieved anonymously because the funds do not have to be linked
to a specific person; it just like getting your change at a store when you use
cash.[108] If the cards become widely used, then there
would be literally millions of people making billions of deposits and
redemptions from their cards and the audit trail would become largely
unmanageable.[109] What is needed is a system that decreases
the anonymity of these exchanges without reducing the utility they would have
for legitimate users.[110] A nationally backed electronic currency
would have the advantage of making the government the final redeemer of the
stored value currency. While this would
not eliminate the possibility of money laundering, it would mean that for funds
to re-enter the legitimate economy, they would have to become visible to law
enforcement authorities.[111] A criminal who had placed funds onto a
stored value card would, when attempting to deposit the money into a bank or
brokerage account, re-enter the visible economy.[112]
There are no technological
reasons why stored value cards and other instruments used to move funds
electronically could not also contain an audit trail with them.[113] Just as the chips on the cards, or the
stored information on a bank’s hard drive, could retain information about the
amount, it could also record the transactions that led to that amount. It is essentially a question of storage
capacity that would create an audit trail capable of being reproduced when the
funds re-enter the legitimate economy.[114] A nationally backed electronic currency
would mandate that the re-entry point be accessible to law enforcement
authorities.[115] If the electronic currency is the creation
of law, then it becomes easier to mandate that the audit trail be maintained
and available to the proper authorities.[116] Because the government is always the issuer
and final guarantor of the currency, it is more legitimate for the law to say
how and when information about the source of the funds must be maintained.
This regulation would not go
much farther than the current controls on money laundering that banks are
subject to, but it would change the development of electronic currency by
giving the government an earlier say in how they are developed.[117] If the government leads the development of
electronic currency, then it is not a case of having to retrofit and control
practices that have developed in the private sector. If regulation is a feature of the landscape from the outset the
burden becomes less onerous. Instead of
trying to determine whether there is enough capacity in the electronic network
to add audit trails to the
information already contained therein, the growth of the system would only take
place with the knowledge that the capacity to record the trail was a necessary
part of the process. Rather than having
banks and other institutions squawk because it would be burdensome to add
identifying features into an already existing system, national currency law
should lead the change and thus avoid a possibly difficult retrofit.
Avoiding the hard choices
that will be necessary to ensure tracing and enforcement runs the risk of
creating a money system that exists in parallel with the legitimate system.[118] If anonymous access to the payment system is
allowed, an entire system could be created that escapes government’s ability to
regulate.[119] It would not be an underground economy
escaping notice, but rather an entire parallel economy that would displace the
present one.[120] This is primary reason that a nationally
backed electronic currency must supplant rather than coexist with private
currencies. The risk is legitimizing a form of exchange, that once present,
would be nearly impossible to wrest away from those conducting illegal
activities in that financial space.[121] Attempting to regulate these transfers after
they have grown in the private sector will create enormous difficulties for law
enforcement.[122] The choices here are not between regulation
and freedom, but rather, it is a question of how best to implement the
necessary regulations. The choices are
between having the law lead the way into cyberspace so that the government has
a hand in controlling the next stage of electronic currency growth and
attempting to close the barn doors after the animals have already left.
One
example of such barn-door-closing attempts is the Uniting and Strengthening
America Act by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act).[123] The USA PATRIOT Act extends current
anti-money laundering measures to nearly all entities that are capable of
conducting large transactions in electronic form.[124] The Act will apply bank-style regulations to
entities from car dealers and jewelers to real estate firms.[125] This Act is an example of what happens when
the government is forced to play catch-up.
The Act extends current regulations that are not necessarily capable of
stopping money laundering to new entities that have not been subject to this
level of regulation.[126] It is difficult to say that the problems
with money can be solved by extending the reach of the current measures. What is needed is a different approach that
reconfigures the object at the core of all this concern: the currency itself.
Creating
a nationally backed electronic currency changes the landscape for money
launderers from the inside-out. The USA
PATRIOT Act is, essentially, an attempt to change it from the outside-in.[127] The Act says that if a jeweler gets a
customer who wants to buy four $80,000 loose diamonds and have them shipped to
Karachi, she should be suspicious.
Should she be just as suspicious if 33 men with similar accents come in
on sequential days and each want to purchase one diamond worth $9, 967 and sent
to Karachi? What if eleven men come in
wanting to use credit cards, another eleven want to use checks and the last
eleven want to use smart cards? Are the
transactions still similar enough to warrant suspicion? The problem with the Act is that it places
the burden (and the liability) on the person facilitating the transaction
without giving her the tools she needs to control, compile and understand the
transactions.
A
nationally backed electronic currency with an embedded audit trail would allow
the government to do the work of compiling the data that would reveal criminal
wrongdoing. Rather than mandating
Soviet-style, neighbor-spying suspicion into other people’s transactions, the
jeweler could sell the diamonds knowing that the transaction itself, if
illegitimate, was creating the audit trail that would undo the criminal
conspiracy. The advantage of a
nationally backed electronic currency is that it creates retrievable data each
time that it is transferred between one person and another. The only way for a terrorist to keep their
funds invisible would be for them to hold their smart cards close to their
hearts deep within their caves. As long
as they did not use the funds, they would be untraceable. But, that result, in effect, takes care of
itself. A nationally backed electronic
currency becomes visible when it is used and it is traceable when authorities
believe that it has been used improperly.
Thus
far, this note has focused on changes that are largely incremental. The difference between money laundering with
and without an electronic currency is largely one of ease and practicality of
enforcement.[128] The regulations that would go into an
electronic currency, whether it is national or not, would be roughly
equivalent.[129] The difference comes in whether the burdens
and assurances are born by the government or the private sector.[130] Current laws have a mechanism for dealing
with disputes that arise over electronic currency whether it is nationally
backed or not.[131] The future of electronic currency is going
to radically change, however.[132] As the previous discussions of fraud and
money laundering have suggested, even old threats are going to take on new form
in a wired world. The focus of Part Six
is a different set of concerns, but still one that can be guided and shaped by
proper legal implementation. This
risk-reward pair concerns the effect of speculation and the impact on
democratic forms themselves if electronic currency is not backed by the
national government.[133]
Changes
in currency can have a very real impact on the political forms that have
created them.[134] The development and adoption of the euro in
the European Union is both a product of, and a critical element in influencing,
the political course of that entity’s future.[135] There is a difficult causal question to be
analyzed about the fate of political systems and their connection to their
currency systems.[136] The founder of Paypal has explicitly (if
somewhat hyperbolically, at this point) declared that electronic currencies
will allow individuals to defund governments with whom they do not agree.[137] The mechanics of this system involve the
speed of the internet, the security of stable currencies, but not necessarily
the backing of any government.[138] Governments have to at least tolerate the
spread of electronic currencies, however, and this seems to be the approach of
the status quo.[139] This note seeks to show that governments who
ignore the link between currency and the nation-state do so at their own
peril. When a currency, electronic or
not, escapes the reins of the government that created it, it can lead to the
swift downfall of that government.[140] While the U.S. government may be large
enough to weather these kinds of storms, loss of control over the currency can
still have a debilitating effect on the nation and the world at large.[141]
The
ability to move funds across the internet allows a person in Moscow, for
example to process nearly all of their transactions in dollar denominations, as
long as there are enough people (also using a combination of electronic
currency technologies) with whom he can trade.[142] The money itself could be logically located
on a server in San Francisco, Antigua, or Bangkok.[143] One of the effects of electronic commerce is
to reduce and eliminate the transaction costs associated with time and
distance.[144] The physical location of the transaction
need not even be a nexus point for the transfer of funds.[145] In other words, if two people agree to
settle a debt while they are in Latvia, the first party could contact her bank
in Brussels, which would then contact the second party’s bank in Dubuque.[146] The second party’s connection to Latvia is
tenuous and the funds do not have to go Brussels-Latvia, Latvia-Dubuque. For purposes of this essay, the question is
not whether Latvia would have jurisdiction over the transaction, but rather
what currency the two parties are using.[147]
What
are the effects if this transaction is carried out in dollars or yen? The argument that there should be a free
flow of currencies through transnational transactions is that each party would
have the highest level of confidence and that the transaction would have the
lowest possible cost if there is competition among currencies for this
particular piece of business.[148] The argument is that there should be a
market for the currency choice in this transaction.[149] To allow this to happen would create
efficiencies for consumers and instill discipline in the monetary policy of the
issuers.[150] The risk is that nation-states will lose the
amount of control that they currently have over monetary policy if they are
exposed to the twin risks of competition and speculation.[151]
The
threat from competition comes in two forms.
First, there is the present competition between currencies for the
business of any given transaction.[152] This competition exists now, but it would be
accelerated and more pervasive if more people have access to electronic
currencies through the internet.[153] The second form of competition comes from
the possibility that people will be able to vote with their wallets.[154] This is the scenario envisioned by the CEO
of Paypal, Peter Thiel.[155] Electronic currency allows people to
expatriate funds without the knowledge or approval of their governments.[156] While such nations could impose export
controls on currency, it becomes infeasible when it would mean cutting their
citizens off from electronic commerce in general.[157] This form of “competition” means that
issuers are able to compete for people to use their currency because it creates
a virtuous circle in which more widespread use creates more acceptance and more
confidence.[158] Arguably, issuers will better manage their
currencies so that they will be attractive to consumers and this will create
the greatest amount of choice and the lowest cost.[159] The argument against creating a nationally
backed electronic currency is that it would stifle competition.[160] Having a competitor like the U.S. government
would mean that other, private electronic currencies would not be able to
thrive.[161]
The
argument that competing with the government will harm consumer choice is
spurious. If the ideal that competition
supporters claim is achievable, then the large number of countries issuing
electronic currencies should be sufficient to spur competition. Additionally, having a nationally backed
electronic currency would not mean that entities like Paypal would no longer
exist. Electronic transfer companies
are not truly issuing their own currencies at this point. They are dealing in dollar denominations
that are still controlled by the federal government. If a Paypal credit is sent out for $100 and it is not spent until
ten days later, any change in the value of that $100 (the fluctuation in the
amount of goods and services it can purchase) is not in the control of
Paypal. Yet, Paypal is
flourishing. It faces stiff competition
from Citibank and Well Fargo in the transfer business and that discipline its
practices. Issuing its own currency
would make Paypal more like a bank and subject it to regulation that could
severely reduce its profitability and harm consumers. There is a middle ground between a state monopoly in the creation
and control of electronic currency and still allowing private firms to offer
services in the transfer of those funds.
The
speculative side of the argument is represented by contradictory figures like
George Soros.[162] He has made billions by betting against
over-valued currencies and the question should be whether speculation is
discipline for improperly valued currencies or a threat to the individual
citizens on the ground who have to deal with the effects of a rapidly and
radically devalued currency like the Thai baht.[163] He is contradictory because he now writes
and speaks against the sort of structures that allowed him his prominence in
the first place.[164] The question for Open Society supporters seems
to be whether we can protect individuals, particularly those in developing
countries, from the ravages of speculative global capitalism.[165] The argument that Paypal CEO Theil is making
is that more open and free electronic transfers will allow people to defund
countries that are behaving monetarily inappropriately.[166]
There is a disconnect between
these positions. Soros and Theil are talking about radically different
conceptions of who it is that pulls the strings of global currency
developments. In a sense, they are not
truly disagreeing, but they are imagining different degrees of global currency
transfer. Soros is saying that we
should act to protect people who are at the mercy of their governments when it
comes to the effects of monetary policy.
Theil is saying that we should give people the means to address this
problem through their own choices. The
difference between the two opinions is largely one of timeframe. Soros is talking about the immediate effects
of global capitalism. Theil is describing
a response that would be effective, but which would require a long lead time
and a great deal of concerted action to bring about. Neither of these positions is logically threatened by a
nationally backed electronic currency.
While it is position that would not be popular in either the libertarian
or the Open Society camps, an electronic currency supported by the U.S.
government could lead to greater stability and confidence even though it would
likely lead to the electronic version of the dollar becoming the mechanism for
that stability. From a purely selfish
perspective, the U.S. should take a leadership position on creating a
nationally backed electronic currency because the widespread acceptance and use
of it would allow the U.S. increased leverage.
From an altruistic standpoint, a nationally backed electronic currency
would create an electronic safe haven for funds that could shield people from
the improvident decisions of their governments.[167]
The
argument against the problems of speculation is that competition would solve
the problems inherent in privately backed currencies.[168] Because consumers would be drawn to a stable
currency, the issuers of private electronic currencies would have an incentive
to stabilize the values of those currencies.[169] There are two problems with this
argument. First, why would a private
backer have a greater ability to
stabilize a currency than a government? Second, why would a private backer have
greater discipline? If the problem with government backed
currencies is that political decisions are sometimes swept away by world
events, it does not logically follow that company will be better able to
weather the storm than a government.[170] If the problem is instead, that governments
make selfish currency decisions, then their two responses. First, the competition among governments would create the sort of forces that instill
discipline. Second, a stable and efficient safe haven currency would allow
people to avoid the choices of their own governments or hedge in several currencies
from the comfort of their laptops.
Either problem is solved by the existence of multiple currencies that
trade against each other, but the multiplicity does not have to be vast for the
mechanism to work.
It can be argued that
regulations will stifle the market for currencies, but it does not logically
follow that therefore a nationally backed electronic currency will create a
greater burden on electronic funds transfer services.[171] The greater risk actually seems to be that
the government will stifle competition among electronic services by applying
banking regulations.[172] The creation of a nationally backed
electronic currency does not increase or decrease the likelihood that there
will be regulation of the electronic transfer industry as a banking entity. If anything, legislation like the USA
PATRIOT Act makes it appear that without the increased tracing and anti-money
laundering features of a national currency, truly onerous regulations get
passed.[173] A nationally backed electronic currency
would allow the government to track illicit payments when necessary, but would
not require that the private sector increase the transaction costs of every
single transfer. Creating a nationally
backed electronic currency may quash private currencies, but that may actually
decrease the net amount of regulation that companies in this space may
face. There will still be ample room
for companies to compete over the types and quality of services that they
provide in the transfer business.[174]
The idea that competition will
solve the temptation to manipulate monetary policy cannot be supported as more
likely when the government is competing against the private sector than when it
is competing against other governments.[175] If competition is what instills discipline
in a market, then it seems absurd to remove it from the realm of a
democratically elected body of lawmakers.
It is the law that creates currency and it is a function of government
to control it. The argument for
competition assumes that governments make unassailable choices in monetary
policy and that individuals are left at their mercy. Is there really greater control over the companies in the private
sector? To argue against a nationally
backed electronic currency is to forget that the law is an effective technology
to control the actions of government.
Democracy itself is a technology that allows the people a measure of
control over their government. Although
shareholders have some say in the conduct of the companies they own, it is a
far cry from true control unless one owns a controlling stake in the
company.
If the problem is government
manipulation of the currency, the law itself could be used by dissatisfied
citizens. Alternatively, democratic
change could allow anti-market forces to prevail at times of great national
crisis. Imagine what would have
happened to the value of a private currency issued by a brokerage firm resident
in the World Trade Center on September 11.
Even though the company would have redundant stores of information the
perception could still be enough to cause a destabilizing panic. With government control over an electronic
currency, the voters themselves could approve measures that lead the market in
times of crisis rather than responding to fear. This sort of “manipulation” may be anathema to true free
marketers, but there are times when an anti-market strategy could reduce the
negative impact on a large number of individual citizens. The government would be able to absorb the
impact through deficit spending or simply the greater confidence that comes
from an institution like the federal government. Either one of these would allow the currency to tack against
prevailing market forces. This maneuver
would be possible, however, only where the technology of law is present to allow
the government to act. It would not be
present in the private sector.
Private companies will issues
electronic currency with the goal of making a profit[176] In the private sector, competition would be
the only tool available and it would push companies towards profit-seeking
actions. No private company would be
small enough to be disciplined by competition and yet be large enough to take
anti-market action when necessary. The
law is a technology that we can use to make sure that government can do this and
there is never a need to make a profit.[177] In these days of Enron-scale distrust why
should we be more willing to assume that a private company “disciplined” by
competition will not be tempted to manipulate the value of the currency that it
issues? Commentators are distrustful of
governments’ willingness to make politically unpopular decisions, but they do
not discuss the pressure that meeting Wall Street’s quarterly expectations
would have on a private company.[178] The potential for abuse and the lack of
control that consumers would have over the process seem to be a distinct
disadvantage of allowing the private sector to develop electronic
currency. If there is to be
competition, there can be functional competition as well as democratic controls
with a nationally backed electronic currency.
People
who distrust the government are really distrusting the law’s ability to
constrain the government. The rule of
law is capable of stopping abuses and ensuring that the government serves the
people rather than controlling them.
The job of government is to handle affairs that are impractical,
inefficient, or impossible for individuals and the private sector to
control. The issuance of an electronic
currency would be a huge undertaking that could best be undertaken by the
entity that has the most experience with issuing it in the first place and the
reach to insure that the currency is accepted.
Government involvement would not stifle innovation, but provide a level
playing field for individuals to control their financial lives. The law is a technology that can lead
change. In the area of electronic
currency, that change could be sweeping and beneficial if we are intrepid enough
to take advantage of this opportunity.
[1] See generally, Steve Bodow, The Money Shot, Wired, September 2001, 97.
[2] Laurie Law, Susan Sabett and Jerry Solinas, How to Make a Mint: The Cryptography of Anonymous Electronic Cash, 46 American University Law Review 1131, 1132, April 1997
[3] Federal Reserve Bank of Minneapolis, The History of Money, http://minneapolisfed.org/econed/curric/history.html
[4] Id.
[5] Id.
[6] Bryan Taylor, A Global History of Currencies, Global Financial Data, http://www.globalfindata.com/frameset.php3?location=/gh/index.html
[7]See, Law, et al., supra; and Kerry Lynn Macintosh, Electronic Cash-More Questions than Answers, 7 Boston University Journal of Science and Technology Law, Summer 2001, 213, 217.
[8] Id.
[9] See, Discussion at Part Five, Infra.
[10] Nova, The History of Money, http://www.pbs.org/wgbh/nova/moolah/history.html
[11] Id.
[12] Id.
[13] Bryan Taylor, supra.
[14] Coinage Act, available at http://www.usmint.gov/about_the_mint/index.cfm?action=CoinageAct.
[15] Of course, when we enter the realm of monetary policy, we often move from the legislative side to the executive. That the policies are not explicit, and in the case of the Federal Reserve, are actually secret, does not remove them from the realm of the law.
[16] Federal Reserve Bank of San Francisco, American Currency Exhibit, http://www.frbsf.currency
[17] Id.
[18] Sally Bolton, A History of Currency Unions, The Guardian, December 10, 2001, available at http://www.guardian.co.uk/euro/story/0,11306,616567,00.html
[19] Macintosh, at 217.
[20] Id.
[21] Fred H. Miller, The Emerged and Emerging New Uniform Commercial Code, Potential Amendments to UCC Articles 3, 4 AND 4A Influence on Other Payment Systems SE37 ALI-ABA, 339 November 11, 1999
[22] Ernest T. Patrickis & Stephanie Heller The Government’s Role In Electronic Commerce: A Review of the Clinton Administration’s Framework of Global Electronic Commerce, 18 Annual Review of Banking Law March, 1999, 325.
[23] Robert D. Fram, Margaret Jane Radin, Thomas P. Brown, Altered States: Electronic Commerce and Owning the Means of Value Exchange, 999 Stanford Technology Law Review 1999, 2.
[24] Michael A. Geist, The Reality of Bytes: Regulating Economic Activity in the Age of the Internet, 73 Washington Law Review, July 1998, 521, 566.
[25] B. Clifford Neuman and Gennady Medvinsky, Netcheque, Netcash and the Characteristics of Internet Payment Systems, Journal of Electronic Publishing, May 1996, vol. 2, issue 1, http://www.press.umich.edu/jep/econTOC.html
[26] Id.
[27] See, Macintosh, at 217.
[28] Maria Cova-Burns, Emerging Payments Primer, www.stls.frb.org/fspc/eleccurr.pdf
[29] Macintosh, 216-218.
[30]Proposed Amendment to the Bank Secrecy Act Regulations, Definition and Registration of Money Services Businesses, 62 Fed. Reg. 27,890, 27,893-94 (1997).
[31] See Unif. Money Servs. Act (2000), available at <http:// www.law.upenn.edu/bll/ ulc/moneyserv/ msb0620.pdf>).
[32] Amelia H. Boss, Searching for Security in the Law of Electronic Commerce, 588 PLI/Pat 401,415, 2000.
[33] Id, at 418.
[34] See, e.g., William J. Clinton & Albert Gore, Jr., A Framework for Global Electronic Commerce http://www.iitf.nist.gov/eleccomm/ecomm.htm, compared to a plan like the Basel Committee’s current round of negotiations, Basel Committee on Banking Supervision, Risk Management Principles for E-Banking, May 2001, 2, available at http://www.occ.treas.gov.
[35] Shahriar Tavakol, Digital Value Units, Electronic Commerce and International Trade: An Obituary
for State Sovereignty Over National Markets, John Marshall Journal of Computer and Information Law, Summer 1999, 1197, 1199.
[36] Kerry Lynn Macintosh, How to Encourage Global Electronic Commerce: The Case for Private Currencies on the Internet, 11 Harvard Journal of Law and Technology, Summer 1998, 733, 741.
[37] See, Taylor, supra.
[38] Coinage Act, supra.
[39] See, e.g., A Decline Without Parallel, The Economist, March 2, 2002. One of the points made by this article is that the while the crater that Argentina has created is novel for its depth, the situation is not new and the continuing concerns of countries like Thailand and even Japan are similar.
[40] Fram, et al, at 124.
[41] Neuman and Medvisnky, supra.
[42] See, Law, et al., supra. There mathematical limitations on the number of times that a currency unit could be split if the electronic infrastructure is to remain manageable.
[43] Tavakol, at 1199.
[44] Macintosh, The Case for Private Currencies, at 758.
[45]Michael H. Dessent, Digital Handshakes in Cyberspace Under E-Sign: "There’s a New Sheriff in Town!", 35 University of Richmond Law Review, January 2002, 943, 945.
[46] See, Macintosh, The Case for Private Currencies, at 750.
[47] Id.
[48] Neuman and Medvinsky, supra.
[49] Cf. Miller, at 341.
[50] Id.
[51] Macintosh, The Case for Private Currencies, at 748.
[52] Neuman and Medvinsky, supra.
[53] Macintosh, The Case for Private Currencies, at 748.
[54] Thus answering the components that Neuman and Medvinsky cite, supra.
[55] This is currently the case with electronic transfers, Boss at 418.
[56] See, Macintosh, The Case for Private Currencies, at 748.
[57] Dessent,at 945; see also Boss, at 418.
[58] Neuman and Medvinsky, supra.
[59] Joseph H. Sommer, Where is a Bank Account?, 57 Maryland Law Review, Summer 1998, 1,95.
[60] Cova-Burns, supra.
[61] Neuman and Medvinsky, supra.
[62] Adrienne Breslin, Electronic Commerce: Will It Ever Truly Realize Its Global Potential?, 20 Penn State Law Review, Fall 2001, 275, 275-76.
[63] Sommer, at 95.
[64] Id.
[65] Id.
[66] Macintosh, The Case for Private Currencies, at 750.
[67] Boss, at 418.
[68] Macintosh, The Case for Private Currencies, at 758.
[69] Uniform Money Services Act
[70] Mike Watson, E-Commerce and E-Law: Is Everything E-Okay? Analysis of the Electronic Signatures in Global and National Commerce Act, 53 Baylor Law Review, Fall 2001, 803, 821.
[71] Achieving Legal and Business Order in Cyberspace: A Report on Global Jurisdiction Issues Created by the Internet, 55 Business Lawyer, August 2000, 1801, 1808.
[72] Basel Committee on Banking Supervision, Risk Management Principles for E-Banking, May 2001, 2, available at http://www.occ.treas.gov
[73] David G. Oedel, Why Regulate Cypermoney?, 46 American University Law Review, April 1997 , 1075, 1084-85.
[74] Neuman and Medvinsky
[75] Oedel, at 85.
[76] Macintosh, The Case for Private Currencies, at 750.
[77] 12 U.S.C. 3401, et seq.
[78] 836 F.Supp 422, (E.D. Mich) 1993,
[79] Id.
[80] Id.
[81]569 F.Supp. 1488, (N.D. Ca. 1983)
[82] Id.
[83] Federal Trade Commission, Implications of Emerging Electronic Payment Systems on Individual Privacy, Prepared Statement before the Subcommittee on Financial Institutions and Consumer Credit, Committee on Banking and Financial Services, September 17, 1997, available at http://www.ftc.gov/os/1997/9709/elecpay.tes.HTM
[84] Id.
[85] Richard T. Preiss, The Consequences of Anonymous Access to the Financial Payments System, 619 Dickinson Journal of International Law, Spring 1998, 619, 627.
[86] Id.
[87] Christopher D. Hoffman, Encrypted Digital Cash Transfers: Why Traditional Money Laundering Controls May Fail Without Uniform Cryptographic Regulations, 21 Fordham International Law Journal, March 1998, 799, 842.
[88] Timothy H. Ehrlich, To Regulate or Not? Risks of E-money and Its Potential Application in Money Laundering Schemes, 11 Harvard University Journal of Law and Technology, 833, 837, (1997).
[89] Id.
[90] Rajeev Saxena, Cyberlaundering: The Next Step for Money Launderers?, 10 Saint Thomas Law Review, Spring 1998, 685, 686.
[91] Id.
[92] Id.
[93] Preiss, at 623.
[94] Bruce Zagaris, A Brave New World: Recent Developments in Anti-Money Laundering and Related Litigation Traps for the Unwary in International Trust Matters, 32 Vanderbilt Journal of Transnational Law, October 1999, 1023.
[95] Saxena, at 671.
[96] Zagaris, at 1030.
[97] Id.
[98] 18 U.S.C. 1986
[99] Wendy j. Weimer, Cyberlaundering: An International Cache for Microchip Money, 13 DePaul Business Law Journal, Fall/Spring 2000/2001, 199, 225.
[100] Id.
[101] Ky Henderson, Casting the Net: Electronic Cash Just Waiting to be Caught, 7 Business Law Today, March/April 1998, 8.
[102] Id.
[103] Id.
[104] Weimer, at 225.
[105] Id.
[106] Weimer, at 226.
[107] Saxena, at 690.
[108] Weimer, at 226.
[109] Preiss, at 630.
[110] Id.
[111] Weimer, at 226.
[112] Id.
[113] Henderson, at 8.
[114] Preiss, at 631.
[115] See, discussion of Fraud, supra.
[116] Preiss, at 631.
[117] Id.
[118] Andres Rueda, The Implications of Strong Encryption Technology on Money Laundering, 12 Albany Law Journal of Science and Technology, 2001, 1, 4.
[119] Preiss, at 631.
[120] Reuda, at 4.
[121] Barry R. McCaffrey, Efforts to Combat Money Laundering, 20 Loyola of Los Angeles International and Comparative Law Journal, December 1998, 791, 800.
[122] Hoffman, at 846.
[123] Yes, I think that “Act” is in there redundantly. See, Uniting and Strengthening America Act by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub. L. No. 107- 56 (2001)
[124] Reuda, at14.
[125] Id.
[126] Preiss, at 630.
[127] Reuda, at 14.
[128] Preiss, at 630.
[129] Macintosh, The Case for Private Currencies, at 748.
[130] Geist, at 566.
[131] Brian W. Smith & Ramsey J. Wilson, How Best to Guide the Evolution of Electronic Currency Law, 46 American University Law Review, April 1997, 1105, 1108.
[132] Bodow, at 97.
[133] The term “speculation” should be given an overly negative connotation. It should be understood as the individual’s answer to arbitrage.
[134] Bolton, supra.
[135] See, The History of the Euro, available at, http://news.bbc.co.uk/hi/english/static/in_depth/business/2001/euro_cash/history/6.stm
[136] Tavakol, at 1199.
[137] Badow, at 97.
[138] Id.
[139] Macintosh, The Case for Private Currencies, at 787.
[140] Taylor, supra, see also, discussion of Argentina, supra.
[141] See, discussion of purpose at http://www.federalreserve.gov/fomc
[142] Badow, at 99.
[143] Id.
[144] Sommer, at 14.
[145] Id.
[146] Id.
[147] The literature on jurisdiction is copious to say the least. A great compendium to start with is Achieving Legal and Business Order in Cyberspace: A Report on Global Jurisdiction Issues Created by the Internet, 55 Business Lawyer, August 2000, 1801. It includes the opinions of some guy named Perritt.
[148] Macintosh, The Case for Private Currencies, at 756.
[149] Id.
[150] Id.
[151] Tavakol, at 1199.
[152] Id.
[153] Watson, at 821.
[154] Badow, at 98.
[155] Id.
[156] Id.
[157] Id.
[158] Macintosh, The Case for Private Currencies, at 750.
[159] Id.
[160] Macintosh, The Case for Private Currencies, at 770.
[161] Id.
[162] George Soros Tries to Save the World from Global Capitalism, Wired, November 1998, available at http://www.wired.com/wired/archive/6.11/wired25.html?pg=14
[163] Id.
[164] See, George Soros, The Capitalist Threat, The Atlantic Monthly, February 1997, available at http://www.theatlantic.com/issues/97feb/capital/capital.htm
[165] Id.
[166] Badow, at 99.
[167] The question of access is still an important and would limit the scope and effect to those with the means to access the internet or some other form of electronic commerce in the first place.
[168] Macintosh, The Case for Private Currencies, at 743-744.
[169] Id.
[170] See, discussion of Argentina, supra.
[171] Tavakol, at 1222.
[172] Macintosh, The Case for Private Currencies, at 750.
[173] Reuda, at 14.
[174] One might consider the case of ATM fees and their increase as competition decreased between the services.
[175] Reuda, at 14.
[176] Alan S. Frankel, Monopoly and Competition in the Supply and Exchange of Money, 66 Antitrust Business Law Journal, 1998, 313, 319.
[177] But see, Macintosh, Electronic Cash, at 216 where she discusses the concept of seinorage. The government does make a healthy profit on the issuance of currency.
[178] Id.