The Evolution of E-Money

Abstract

Introduction This paper analyzes the concept of electronic money in the context of the evolutionary theory of the origin of money and put forward the hypothesis that the emergence of cryptocurrency was the next step in the evolution of money, which resulted due to the presence of objective disadvantages of unsecured paper money. Literature review The concept of electronic money is rather ambiguous. Under the electronic money, people often understand the accounting system of rights to public and private currency. Currently, these systems use electronic storage media. However it is useful to note, that such systems, as well as non-cash payments, were around thousands of years ago (Rupeika-Apoga and Nedovis, 2015; Thalassinos, 2008; Thalassinos and Kiriazidis, 2003). Thus, the modern electronic system is only an advanced version of the thousand-year-old technology. While investigating electronic money from such perspective it can be said that the modern means of bank account access: bank payment cards and internet banking are not electronic money, as these systems simply allow operations with real money held in bank accounts. In other words, these products only provide means of access to real money (Huerta de Soto, J. 2008; Allegret et al., 2016; Boldeanu and Tache, 2016; Fetai, 2015; Glavina, 2015). The problem is somewhat complicated by the fact that all modern banking system uses the principle of fractional reserve funds that were deposited (demand deposits and current accounts), that, in fact, is a fraud (Arslan-Ayaydin et al., 2014; Grima et al., 2016; Suryanto, 2016; Thalassinos et al., 2013; Thalassinos et al., 2015). The use of this principle leads to the fact that the banking system as a whole assumes obviously impracticable obligations, leading to the fact that the volume of bank liabilities (non-cash) far exceeds not only the quantity of cash available in the banking system, but the entire amount of real money in the monetary base of the economy (Rothbard, 2003; Hamid and Won Kie, 2016; Tcvetkov et al., 2015). On the other hand, the emergence and development of means of Internet payments (Webmoney, Yandex, through QIWI, etc.) led to the fact that there were types of payment instruments which, although not related to the procedures of opening a bank account, were based on P2P lending of real money and recognition of the rights to these funds through the ledgers. Thus, the essence of this phenomenon is similar to the "non-cash money". However the problem of fractional reserve is still present here. It is obvious that the number of phenomena that have grown in recent years and are interpreted in the literature as "electronic money" have nothing different from other money substituents which are backed by real monetary units such as: rubles, dollars, gold, etc. For example, in order to obtain electronic money (title characters) WMR, issued by the Webmoney, it is necessary to transfer the corresponding amount in rubles to Issuer's account. Of course, you can get these title characters from another user in the system, but the original source of all the characters is the issuer, that is committed to exchange titular characters for real currencies. The same applies to other similar payment systems: >, >. As a result, "electronic money" is created on the basis of the existing monetary units, simply replacing them in certain sectors of the economy. Of course, the issuer is able to release a larger amount of "electronic money" as opposed to real money, i.e., to act on the principle of fractional reserve. However, it does not mean that "electronic money" is essentially the new kind of money, because this feature can be inherent to any cash substitutes. We can say that the modern "electronic money" is a natural stage in the evolution of means of payment. However, the novelty of "electronic money" is only a technical aspect. …