Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123752
Authors: 
Weber, Warren E.
Year of Publication: 
2015
Series/Report no.: 
Bank of Canada Working Paper 2015-3
Abstract: 
Beginning in 1864, in the United States notes of national banks were the predominant medium of exchange. Each national bank issued its own notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to emoney from the U.S. experience with national bank notes. It examines historical evidence on how well the bank notes - a privately-issued currency system with multiple issuers - functioned with respect to ease of transacting, counterfeiting, safety, overissuance and par exchange (a uniform currency). It finds that bank notes made transacting easier and were not subject to overissuance. National bank notes were perfectly safe because they were insured by the federal government. Further, national bank notes were a uniform currency. Notes of different banks traded at par with each other and with greenbacks. This paper describes the mechanism that was put in place to achieve uniformity. The U.S. experience with national bank notes suggests that a privately-issued e-money system can operate efficiently but will require government intervention, regulation, and supervision to minimize counterfeiting, promote safety and provide the mechanism necessary for different media of exchange to exchange at par with each other.
Subjects: 
Bank notes
E-money
Financial services
JEL: 
E41
E42
E58
Document Type: 
Working Paper

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