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Electronic Cash

Digital money is not a new concept. For years the big world banks have used electronic transfers to exchange trillions of dollars among themselves without ever actually touching a real dollar bill. Until now, however, that technology hasn't been available to the rest of us. But cash is about to go through a whole new change of life, on the Internet.

Money, in real life, is quite an adaptable little devil. There are credit cards, debit cards, bank notes, bonds, travelers checks --even poker chips can be exchanged for the cold hard stuff. But when it comes to the Internet, we aren't quite as willing to take a gamble with the business of money. And it now appears that our hesitancy to mix money and the Internet is a major handicap to Net commerce.

Warren Eugene is one of thousands of cyberpreneurs to open up a new business in cyberspace. He's willing to bet that we will find and accept new ways to spend money over the Internet. In fact, he's convinced that we will send him millions upon millions of our dollars over the Net to try our luck at his Internet Casino. Warren believes that the Net can provide a location for the biggest gambling operation the world has ever seen, and he just might be right.

But if the gamblers of the world are going to play in cyberspace big time, they are going to have to find a system where they can exchange money the same way that they do in the real casinos, except that they are now going to have to do it with some form of electronic cash.

This is probably not the first application David Chaum had in mind for his life's work: E-cash, electronic "coins" that are transferred between individuals, vendors, and the bank as anonymously as paper cash. As a cryptographer and Internet visionary, Chaum has been a champion of secure, private, and untraceable digital cash for the masses for the past 15 years. Known to some as the "privacy guru," American-born Chaum is the founder of DigiCash, an Amsterdam-based company specializing in electronic commerce. It's a complicated business, and it's making some people nervous.

Around the world, governments have been eyeing the whole phenomenon with a great deal of caution, worried about both the speed and the anonymity of untraceable money. It's a serious issue, serious enough that in Washington a congressional subcommittee is actively looking into it.

In the case of Warren Eugene's off-shore-based Internet Casino, even if people in law enforcement believe that Internet gambling could eventually become one of the storehouses for illicit money, it's not yet clear whether the long arm of law will be able --or even want-- to stretch that far into cyberspace.

In fact, even in purely retail corners of the Net, law enforcers are still wondering about issues of taxes, regulation and jurisdiction. And many of us are quite nervous when it comes to putting any part of our wallet on the Net.

Peter Granoff wonders how much of a barrier this is to his new business of selling wine from some of California's best wineries to the world through his Virtual Vineyards website. He, like many new cyberpreneurs, has a good idea and a wonderful prospective client base. And he, like so many other cyberpreneurs, is patiently waiting for us to open our wallets to the wired world.

Whether or not we as a society will have a problem adapting to a new currency on the Net is still up in the air. Many companies are racing to develop electronic cash systems, and some, like David Chaum's E-cash, are no longer just a theoretical concept. E-cash is now backed by real currency from a real bank and can be used to buy real things on the Internet. But just how quickly we'll adapt to this new cash is still one of the major issues of financial life on the Internet.