Appendix One
Digital Cash
Digital Cash is literally the electronic representation of money - money that exists only as an electronic message - and so is often also called electronic money or electronic cash. It can be implemented in such a way that it is the equivalent of paper cash, but it can also be implemented to preclude some features like complete anonymity, or to include other attributes not possible with paper cash such as links to the current owner.
A number of companies are working to provide a convenient, acceptable and secure system that enable Internet users to make payments using digital cash. These systems will allow people to open accounts with participating banks and then download digital cash into an `electronic wallet' on their computer terminals or on a smart card. Using encryption, the electronic wallet can be connected to the Internet for the purposes of buying and selling goods and services from others on the Internet. The digital cash on the card is then exchanges directly with the other party. Any transaction will be anonymous and will operate independent of border controls or other government intervention. Digital cash systems will not necessarily have links to existing banks and will deal in purely digital currency with no analogue in conventional money.
The benefit of anonymity must be weighed against the fact that lost digital cash is as unrefundable as lost paper money. Users will have to guard their electronic wallets as carefully as they guard their other valuables. Computer viruses will be real threats potentially stripping bank balances at the same time as destroying the operating systems.
If payments are made in purely digital currency, domestic exporters would be paid directly to their electronic wallets or electronic bank accounts, which could be administered by an electronic bank in another country. They will be then free to spend this money anywhere over the Internet. The real problem is how will tax collectors be able to measure these exporter's income. This suggests there may need to be a review of tax systems if digital cash systems are widely employed and used.
Smart Cards
Smart cards are distinguished from ordinary EFTPOS cards, by the presence of a computer chip, memory and an operating system that can be programmed for a range of tasks, the most fundamental of which is security. Smart cards potentially have multiple uses - as EFTPOS cards, as credit/debit cards, for loyalty programmes, as phone cards, to provide access to buildings, computers etc and as electronic wallets for small transactions.
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