Electronic Money

Electronic money is money which is exchanged electronically. Electronic money is also referred to as e-money, digital money, e-currency, electronic currency, digital cash, digital currency or electronic cash.

The exchange of electronic money is executed using a computer network. Some examples of electronic money are direct deposit, virtual currency, digital gold currency and EFT (electronic funds transfer).

Basically, electronic money is a system of debits and credits. These debits and credits exchange value within another system. This practice could be done offline or in an non electronic manner as well.

There are two main types of electronic money, identified electronic money and anonymous electronic money. Anonymous e-money is used in a manner similar to paper money. Once anonymous electronic money is withdrawn, it does not create a trail. On the other hand, identified electronic money contains identifying information regarding the person withdrawing it. Identified e-money does leave a transaction trail once it is withdrawn.

There are many benefits to electronic money. Some of these are convenience and privacy. Also, transactions can be done very efficiently keeping transaction fees low. Transactions involving electronic money take much less time than traditional transactions.

However, there are also concerns with electronic money. For example, since money can be moved in a stealth manner, there is a concern with money laundering and tax evasion. Computer crime or fraud is also a large issue. Banks and customers use digital signatures and public-key cryptology to make electronic money transactions possible and secure.