Week 5 - Electronic Currency

Electronic money refers to money or scrip which is exchanged only electronically, electronic money also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency. This involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money. Many systems will sell their electronic currency directly to the end user, such as Paypal and WebMoney, but other systems, such as e-gold, sell only through third party digital currency exchangers.
The main focuses of digital cash development are 1) being able to use it through a wider range of hardware such as secured credit cards; and 2) linked bank accounts that would generally be used over an internet means, for exchange with a secure micropayment system such as in large corporations (PayPal).
Although digital cash can provide many benefits such as convenience and privacy, increased efficiency of transactions, lower transaction fees, new business opportunities with the expansion of economic activities on the Internet, there are many potential issues with the use of digital cash. The transfer of digital currencies raises local issues such as how to levy taxes or the possible ease of money laundering. There are also potential macroeconomic effects such as exchange rate instabilities and shortage of money supplies (total amount of digital cash versus total amount of real cash available, basically the possibility that digital cash could exceed the real cash available).