2 June 1997
Source: http://www.treas.gov/treasury/press/pr050797.html

May 7, 1997
RR-1674

G-10 Working Party Releases Study On Key E-Money Issues

The Department of the Treasury announced today the release of a report by the Deputies of the G-10 finance ministers and central bank governors that outlines a broad consensus of their Working Party on Electronic Money regarding key considerations that should help guide national approaches to emerging electronic money technologies.

The Working Party on Electronic Money was formed after the G-7 Heads of State and Government, at the 1996 summit meeting in Lyon, Frances, called for a cooperative study of the implications of recent technological advances in retail electronic payments. In particular, they sought ways to ensure that the benefits of electronic money are fully realized. The report also includes a survey of the approaches to electronic money issues in each of the G-10 countries.

"Representatives of the G-10 countries have endorsed a common set of considerations for new consumer electronic money products," said Lawrence Summers, Deputy Secretary of the Treasury. AOur report emphasizes the issues that providers, users, and policy makers should take into account in assessing the benefits and the risks of these new forms of electronic payments.

The Working Party, headed by Tim Geithner of the U.S. Treasury, brought together representatives from finance ministries, central banks, and law enforcement authorities. The four key considerations they identified address national and cross-border challenges in the implementation and use of electronic money by consumers and providers and for governments in the development of national policies.

o Transparency

o Financial integrity

o Technical security

o Vulnerability to criminal activity

These consideration emerged from the Working Party’s review of multi-purpose prepaid cards and prepaid mechanisms for use over open computer networks.

The broad objectives of the Working Party were to address three policy areas: consumer protection, law enforcement, and supervision. The review found that most countries are reviewing the application of existing law to new electronic money issues in all three areas, given the early stage of development of these new products. Many governments are weighing the degree to which market incentives can be used to achieve public policy objectives.

"Authorities in many countries view the application of new regulations as premature, choosing instead to assess the impact of market discipline on the ways in which providers manage their financial and operational risks," Summers said. The report also noted that countries may need to consider how best to design national policies to minimize impediments to the cross border use of electronic money products.

The report concluded that the Working Party provided a useful forum in bringing together the perspectives of diverse authorities within the G-10 countries, and that a similar effort might be useful in the future if circumstances warrant. However, it is not necessary at this time to establish new formal international structures to coordinate a policy response to electronic money.

The U.S. delegation to the G-10 Working Party included officials from the Federal Reserve Board --Jeff Marquardt and Heidi Richards --and from the Office of the Comptroller of the Currency--Jim Kamahachi and Dan Nolle.

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