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The Efficiency of Private E-Money-Like Systems: The U.S. Experience with State Bank Notes

Warren Weber

Staff Working Papers from Bank of Canada

Abstract: In the United States prior to 1863 each bank issued its own distinct notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to e-money from the U.S. experience with state 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. It finds that bank notes made transacting easier and were not subject to overissuance. However, counterfeiting of bank notes was widespread, bank notes were not perfectly safe, and notes of different banks did not exchange at par and rates of exchange were volatile. The paper also examines how bank notes were regulated and supervised and how that regulation and supervision affected the functioning of the system. The U.S. experience with state bank notes suggests that a privately-issued e-money system can operate efficiently but only with appropriate government intervention, regulation, and supervision to minimize counterfeiting and to promote safety and par exchange.

Keywords: Bank notes; E-money; Financial services (search for similar items in EconPapers)
JEL-codes: E E4 E41 E42 E5 E58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2014
New Economics Papers: this item is included in nep-ban, nep-his, nep-ict, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

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Working Paper: The efficiency of private e-money-like systems: the U.S. experience with state bank notes (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:14-15

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