Ecash


Taxation

(SE) If eCash is both earned and consumed entirely online how can a state tax it? Does the state even have a right to tax it?

(AK): Could the government tax all ecash transactions at a flat rate, regardless of their purpose?

(DF) Putting aside the problem of detecting ecash transactions, what modifications in the definition of income, capital gains, and the like for tax purposes become necessary if many taxpayers are transacting and keeping accounts in a variety of private forms of ecash?

(DF) Suppose a particular private ecash is defined in a way that makes its value, measured in dollars, highly variable. Does holding it count as gambling? What if the money is deliberately created for that purpose? One could, for example, run a lottery by issuing a million units of ecash, each selling for a dollar, and announcing that after a week, one unit would be randomly selected and reevaluated to $950,000, while the rest would become worthless.

Legal Tender

(SE) Traditionally in a court of law monetary damages may be awarded to make parties whole. This is because legal tender, like the USD, is a medium of payment allowed by law and recognized by a legal system to be valid for meeting a financial obligation. In a world where private eCash dominates will a court of the state have the authority to force a party to give such private eCash as a form of remedy?

(DF): What happens to the concept of legal tender if practically nobody is using the official government money? What if the U.S. government goes out of the money business entirely?

Law Enforcement and Regulation

(AK): What potential methods of law enforcement might be used to prevent illegal use of ecash?  A digital equivalent of confiscation of the ecash?

(MR): Criminals would have the greatest interest in completely anonymous eCash.  A murderer of a person could therefore easily receive his payment via eCash. How would that solve the problem of an increasing criminality?

(MR): As already discussed in class, a protection against fraud on eBay with a well-known feedback system would be possible. However this would only make sense for small transactions. So what should be used for large multi-million dollar transactions?

(AK):  What regulations could the federal government impose on ecash and could they be effective?  Would the SEC be the appropriate agency to deal with regulating ecash?

(AK): What level of anonymity restrictions could the government impose with respect to ecash?  Could the government use similar techniques to those employed by China to ban websites or services that provide true anonymity?
Miscellaneous

(SE) Private eCash, like any currency, can gain credence by being "backed" by valuable and naturally scarce tangible commodities (e.g. gold). Imagine if eCash providers choose to back the currency by virtual commodities (e.g. facebook credits, WoW items, copyrighted content etc.) that by definition are not scarce. If the provider runs into trouble it could choose to simply inflate the currency by creating more virtual commodities. Would it be considered criminal behavior if the provider begins exploiting consumers through such inflation? Should a government step in? Or should we instead rely on competing currency providers to remedy this?(MR): Will eCash just be usable in cyberspace or am I able to draw money from my eCash account to use it in real? How should this work if eCash is not provided by central organizations like banks? Do I have to print my own dollars?

(MR): Suppose eCash would already exist and it would not be offered by banks but would be completely private. Who will be liable  if something goes wrong? Currently, if a bank transaction goes wrong my bank is liable to me.

(SE) As credit cards (CCs) become a predominate form of exchange many small business are seeing their profit margins get squeezed by the processing fees. If the store owners choose to not accept CCs they will certainly loose significant business because nowadays fewer and fewer people are using paper cash. Since the government has an interest in having its own currency be used, and since the state is also offloading the burden of creating and managing cash onto the hands of CC companies, should the government come in and regulate the processing fees that can be charged by these entities?

(AK): Who would have jurisdiction over ecash used either in the United States or internationally?

(AK): Alex Korzh

(DF): David Friedman

(MR): Markus Reinfeld

(PYS): Previous Year's Student

(SE): Saad Enam

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