Electronic Money and Relevant Legal and Regulatory Issues

t for the goods, securities, and services that they sell. Money serves three purposes.10 First, as just mentioned, it serves as a medium of exchange. Second, as a standard of value, it serves as a measure for the value of a good or service and thus provides a standard for making comparisons between different goods and services. Finally, it functions as a store of value, thus it can be saved and used in the future. In order to realize its three functions, money possesses certain characteristics which allow it to enable transactions. First, it must be durable to function as a store of value. In other words, when money is not spent, it is retrievable. However, if it is destroyed, stolen, or otherwise lost, it is not replaceable. Second, it must be difficult for individuals to create or counterfeit money. Public trust in money's legitimacy is an essential element of its successful use as a medium of exchange. Third, it must be widely accepted. The larger the community of users who trust and accept money, the more that its value as a medium of exchange is increased. Finally, when it is exchanged, there is anonymity.11 2. What is electronic money? E-banking as well as e-money are rather generic terms and we need to specify what we are talking about. It is well accepted that e-banking can be separated into two streams: one is e-money products, mainly in the form of stored value products, the other is electronic delivery channel products or access products. The latter are products that allow consumers to use electronic means of communication to access conventional payment services, for example, use of a standard personal computer and a computer network such as the Internet to make a credit card payment or to transmit instructions to make funds transfers between bank accounts. The significant novel feature of these access schemes is the communication method and so they do not raise the same concerns as e-money schemes and are not considered further in this article. As e-money is still at the early stage of development, there is still no unified definition of e-money. Different person even different bodies have described and categorized e-money products in different ways. The European Commission defined electronic money in its Draft Directive as:12 a. Stored electronically on an electronic device such as a chip card or a computer memory; b. Accepted as means of payment by undertakings other than the issuing institution; c. Generated in order to be put at the disposal of users to serve as an electronic surrogate for coins and banknotes; and d. Generated for the purpose of effecting electronic transfers of limited value payments. The Consumer Advisory Board of the Federal Reserve Board of the USA described that e-money is money that moves electronically. It can be carried on the persons in the form of a smart card or stored-value cards or electronic wallets. It can be used at the point of sale or it can be used person-to-person directly without the intervention of any outside entity. It can be moved around or spent through telephone lines to banks or other provides or issuers. It can also be moved around or spent through links with interactive cable television and personal computers.13 From the above definition and description, we can conclude that e-money is a "stored-value" or "prepaid" payment mechanism in which a record of the funds or "value" available to a consumer is stored on an electronic device in the consumer's possession. The electronic value is purchased by the consumer and is reduced whenever it is transferred directly to other devices, or the consumer uses the device to make purchases via point of sale terminals or over open computer networks such as the Internet. In contrast to the many existing single-purpose prepaid card schemes (such as prepaid telephone cards), e-money products are intended to be used as a general, multipurpose means of payment. It is clear th