2. In Japan, the Prepaid Card Law was enacted in December 1989. See MOF to Implement Prepaid Card Law Probably in September, COMLINE Daily News Tokyo Financial Wire, Feb. 13, 1990, available in LEXIS, News Library, Arcnews File. The law requires that card-issuing companies register with the Minister of Finance and that deposit requirements apply to all cards worth more than 1000 yen. See id.

3. In Europe, the report to the Council of the European Monetary Institute on pre-paid cards (issued by the Working Group on European Union ("EU") Payment Systems in May 1994) states that issuing prepaid cards could be considered deposit-taking and therefore would be subject to supervision. See John Capper, EU Curbs Urged on Cash Card Issuers, FIN. TIMES, May 11, 1994, at 2 (reviewing study calling for limiting of authorization for electronic prepaid cards to previously authorized credit unions). Consequently, EU member states have implemented (or are implementing) this policy at the local level. See id. (stating that most EU states already have achieved limitation).

4. In the United States, the Board of Governors of the Federal Reserve System ("FRB") proposed amendments to the regulations regarding Electronic Fund Transfers. The FRB has suggested that certain types of electronic cash be exempt from federal regulations that currently apply to electronic fund transfers. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,696 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996). The FRB's proposal would: (1) completely exempt from regulations off-line unaccountable systems (where value is stored only on the card); (2) exempt off-line accountable systems (where value is stored in the system as well as on the card) from certain regulations pertaining to requirements of receipts and periodic statements and error resolution procedures; (3) exclude all off-line systems that have a maximum stored value of $100 at any given time; and (4) exclude on-line payment systems from the periodic statement requirement, error resolution procedures, and change in terms notice requirements. See id. at 19,703.

5. See Kim S. Nash, Cybercash at Risk: Money Laws Lacking, COMPUTERWORLD, Dec. 23, 1996, at 1-2 (describing hands-off policy stance of U.S. regulators with respect to electronic cash); see also Tony Jackson, Cybermoney Gains Currency, Past and Future, FIN. TIMES, Feb. 1, 1997, at 3 (describing desired policy of the Bundesbank to regulate electronic network money).

6. The term "regulators" will be used in this Essay to refer to the authorities at the national or state level, as well as to those authorities at the supra-national level in Europe (such as the European Commission, the European Monetary Institute, and the Bank for International Settlements) and the federal level in the United States (such as the Federal Board of Governors, the Federal Deposit Insurance Corporation, the Department of Treasury, and Congress).

7. Mondex is a smart card invented by National Westminster Bank. The card stores amounts of money that can be used like cash. See Nick Gardner, High Tech Cards Poised to Render Cash Obsolete, TIMES (London), Dec. 12, 1993, at 16.

8. Proton, a Belgian smart card affiliated with American Express, can store and transfer monetary value. See American Express Plans Smart-Card Project, N.Y. TIMES, Nov. 15, 1996, at D6.

9. Digicash, an on-line system developed by David Chaum, allows an Internet user, with credit cards or other conventional banking forms, to purchase a certain amount of E-cash that can be used to purchase goods and services on the Internet without the need for exchanging credit card information with each vendor. See Peter Lewis, Attention Internet Shoppers: E-Cash Is Here, N.Y. TIMES, Oct. 19, 1994, at D4.

10. COMMITTEE ON PAYMENT & SETTLEMENT SYSTEMS & GROUP OF COMPUTER EXPERTS, CENTRAL BANKS OF THE GROUP OF TEN COUNTRIES, BANK FOR INTERNATIONAL SETTLEMENTS, SECURITY OF ELECTRONIC MONEY 35 (1996).

11. See id.

12. See R.E. de Rooy, De chipknip: een (juridische) verkenning, NEDERLANDS JURISTENBLAD, Apr. 5, 1996, at 509-13 (explaining that this solution has been chosen by both card schemes in the Netherlands and describing other possible legal qualifications).

13. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,699 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996).

14. Other issues that are relevant for regulators are consumer protection, interoperability of products, and possible use of electronic money for criminal purposes. See Paul Howcroft, Future Law and Regulation of Pre-Paid Cards, EUROPEAN FIN. SERVS. L., Apr. 1996, at 113-16.

15. See generally BANK FOR INTERNATIONAL SETTLEMENTS, IMPLICATIONS FOR CENTRAL BANKS OF THE DEVELOPMENT OF ELECTRONIC MONEY (1996).

16. See id.

17. See FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 40,494 (1996) (setting forth FDIC's legal opinion regarding proper treatment of funds underlying stored value cards for purposes of qualifying for federal deposit insurance).

18. It will not be easy to determine which banking supervision law applies to such a transaction. The definitions used in these laws also may vary among countries, which may result in requiring the scheme operator to be a bank under the banking supervision law of country B, although the operator would not have to be a bank under the supervision law of country C.

19. See A. Michael Froomkin, Flood Control on the Information Ocean: Living with Anonymity, Digital Cash, and Distributed Databases, 15 J.L. & COM. 395, 496 (1996) (pointing to tension between free speech, anonymity, and electronic cash regulation); see also Henry H. Perritt, Jr., Legal and Technological Infrastructures for Electronic Payment Systems, 22 RUTGERS COMPUTER & TECH. L.J. 1, 30-31 (1996) (stating that law must respond to risk of dishonor and forgery in electronic payment systems).

20. See, e.g., 15 U.S.C. . 1601 (1994) (stating that Congress intended to strengthen financial institutions and to give consumer protection of various credit terms available by informed use of credit); 31 U.S.C. . 5330 (1994) (requiring registration of any money-transmitting business with Secretary of Treasury even if licensed in state).

21. For examples of such laws, see the National Bank Act, the Federal Reserve Act, the Banking Act of 1933, the Banking Act of 1935, the Federal Deposit Insurance Act of 1950, the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the Federal Deposit Insurance Corporation Act of 1991, the Depository Institutions Disaster Relief Act of 1992, and the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. For an example of a state law that establishes a system of safe and reliable banking by creating secure depositories as needed by the business public, see N.Y. BANKING LAW . 1 (McKinney 1990).

22. For example, Postal Service employees may not issue money orders if they have not received payment from the purchaser. See 18 U.S.C. . 1713 (1994) (imposing fine for officer or employee of Postal Service who issues money order prior to receiving payment).

23. See 12 U.S.C. . 4401 (establishing legally binding netting procedures to reduce risk found in banking system and financial markets).

24. See 15 U.S.C. . 1666f (forbidding card issuer from prohibiting retailer from offering discount to cardholder by contract or other means). The debate on this issue in Europe still has not been resolved.

25. See id. . 1693.

26. See 12 U.S.C. . 1759 (restricting membership and its rights to groups that share common bond of occupation, association, or community).

27. See Ezra C. Levine, The Regulation of Check Sellers and Money Transmitters, CIVIL REMEDIES IN DRUG ENFORCEMENT REPORT, (Nat'l Ass'n of Att'ys Gen.), Mar./Apr. 1993, at 12-13. Ezra C. Levine, New Laundering Concerns: Safety in Cyberspace, MONEY LAUNDERING L. REP., Oct. 1995, at 1, 1-3 [hereinafter Levine, New Laundering Concerns].

28. See Levine, New Laundering Concerns, supra note 30, at 2.

29. See id.

30. See id.

31. See id.

32. For informative papers on the differences between regulation in Europe and in the United States, see GIANDOMENICO MAJONE, MUTUAL RECOGNITION IN FEDERAL TYPE SYSTEMS (EUI Working Paper No. 93/1); GIANDOMENICO MAJONE, CONTROLLING REGULATORY BUREAUCRACIES: LESSONS FROM THE AMERICAN EXPERIENCE (EUI Working Paper No. 93/3); GIANDOMENICO MAJONE, WHEN DOES POLICY DELIBERATION MATTER?, (EUI Working Paper No. 93/12); and GIANDOMENICO MAJONE, UNDERSTANDING REGULATORY GROWTH IN THE EUROPEAN COMMUNITY (EUI Working Paper No. 94/17); see also REGULATING EUROPE (Giandomenico Majone ed., 1996).

33. In a lecture for the IBIT Forum in Basle on June 11, 1996, Wendelin Hartmann, a member of the Directorate of the Deutsche Bundesbank, stated: "Consequently, the EU central banks have agreed as an initial step to ensure, above all, that this development is subject to control. In all EU countries, therefore, legal initiatives have been set in motion, as a result of which only credit institutions which are subject to banking supervision will be allowed in future to issue multi-purpose prepaid cards."

34. WORKING GROUP ON EU PAYMENT SYSTEMS, REPORT TO THE COUNCIL OF THE EUROPEAN MONETARY INSTITUTE ON PREPAID CARDS (May 1994).

35. In his testimony before the Subcommittee on Domestic and International Monetary Policy of the Committee on Banking and Financial Services of the U.S. House of Representatives, Eugene A. Ludwig, Comptroller of the Currency, formulated four guiding principles to direct appropriate government responses with respect to technological developments: (1) the government should intervene only when there is a clear need to advance the public interest; (2) the government should articulate the public policy goal and permit the private sector to develop the means to pursue that goal; (3) the government should be extremely wary of imposing requirements solely for its administrative convenience; and (4) the regulatory infrastructure must be maintained and modernized to remain up-to-date. See The Future of Money, Part II: Hearing Before the Subcomm. on Domestic and Int'l Monetary Policy of the Comm. on Banking & Fin. Servs., 104th Cong. 9 (1995) (statement of Hon. Eugene A. Ludwig, Comptroller of the Currency) (summarizing desired attitude for regulators that operate in well-regulated environment).

36. See Henny van der Wielen, Deputy Director of the Central Bank of the Netherlands, Electronic Money: A European Perspective, Address Before the London Bankers Club (Feb. 4, 1997).