From: "E. ALLEN SMITH" <EALLENSMITH@ocelot.Rutgers.EDU>
Date: Sun, 28 Jan 1996 05:07:34 +0800
To: cypherpunks@toad.com
Subject: Feds on Internet Banking
Message-ID: <01I0IE04YCQ8A0UP9Y@mbcl.rutgers.edu>
MIME-Version: 1.0
Content-Type: text/plain


	Evidence that the Fed has noticed Internet banking. It looks like
they're more concentrating on electronic checks than on digital cash, though;
I may be mistaken in that, however. Any of the lawyers on here know much about
banking law?
	-Allen

   Reuters New Media
   
   _ Friday January 26 2:01 PM EST _
   
Boston Fed Minehan Warns Of "Virtual" Bank Danger

   NEW YORK - Federal Reserve Bank of Boston President Cathy Minehan is
   warning against potential risks of "virtual" banking -- or
   electronic account systems handling electronic money.
   
   Minehan stressed that the regulatory community has just begun to
   consider these issues and that much work needs to be done before it
   even knows all the questions to ask, let alone what answers to give.
   
   "Legislation and regulation of new payments system alternatives
   could be unwise right now, but that does not mean that participants in
   such systems should not oversee them or that central banks should not
   be concerned" Minehan said in an address to the Goldman, Sachs
   Conference on Risk Reduction in Payments, Clearance and Settlement
   Systems.
   
   "'Smart' card technology is now being used to store electronic
   'notes' authorized by the card-holder's bank that can be used to
   transfer value between banks, consumers and merchants," she said.
      
   "These electronic 'notes' flow over the Internet and give
   authorization for funds to be withdrawn from a bank account and paid
   to another party electronically," Minehan said.
   
   "This can come close to being a new form of currency in that the
   potential exists for the value on the card to remain in circulation,
   transferring from card to card, and one endpoint to another, without
   necessarily being converted to a more traditional form of money,"
   she said.
   
[...]

   "'In this regard, it is especially intriguing to consider how the
   'virtual' bank might be regulated," said Minehan. "Some
   maintain that virtual banking is just a new form of bank which all the
   usual rules and regulations apply," she said.
   
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