Comments: Payment systems - the explosion of 1995 is happening in 2006

Interesting developments in the Wild East

In the past 12 months, the government of Belarus tried to clamp down on WebMoney. I am closely following news about WM, yet even I failed to notice; another testimony to the resilience of WM.
There are different opinions about the reasons (the most popular being that Lukashenko's regime perceived WM as an uncontrollable channel of opposition-financing, the most plausible being that WM provided Belarusians with defenses against monetary policies designed to rob them blind), but the fact is that WM scratch-cards are no longer on sale at subway stations, wmbelarus.com is hosted in Switzerland, and the owner of the first WM exchange in Belarus was sentenced to two years of public works.
But most importantly, a partially state-controlled bank rolled out its own digital payment system, easypay.by (which is surprisingly well-designed from a purely technical point of view). Guess what happened: wmbelarus.com set up an exchange for easypay vs. WM and easypay just replaced the shut-down infrastructure for purchasing and selling WM. Otherwise, WM circulation in Belarus keeps increasing and most of e-commerce is still done in WM.

This trick of circumventing regulation by setting up an out-of-jurisdiction exchange is not new to WM. It is the same way they defeated EU regulations by setting up a compliant issuer in Latvia and an exchange somewhere in the cyberspace (it keeps moving, but noone notices).

To their credit, Russian and Ukrainian authorities (both pre- and post-orange revolution ones) continue their hands-off approach. Meanwhile Putin's alma mater (the law school of St. Petersburg State University) is offering courses in "arbitration of on-line disputes". Sponsored by guess whom.

Posted by Daniel A. Nagy at May 7, 2006 09:32 AM

slightly related post in a thread about paypal and financial services offerings

it also mentions that several of the digital cash operations in the 90s were structured as a mechanism of acquiring the float on the money in the infrastructure.

in the mid-90s some number of the central banks stated that they would allow the operations to retain the float through startup phases but after that they would be required to start paying interest on the customers' value on deposit in the infrastructure.

this somewhat put a damper on some amount of digital cash ventures related to starting and operating such infrastructures (that they would not be able to count on the large float bonanza):
http://www.garlic.com/~lynn/2006i.html#14

Posted by Lynn Wheeler at May 7, 2006 05:36 PM

Lynn, was that in the US or in Europe? I can well imagine that Mondex were told the float would be regulated ... because they based their business case on such float capture issues and tried to reserve it to Mondex International. Such an amusing selling technique :)

Posted by Iang at May 8, 2006 06:46 AM

Iang wrote:
> Lynn, was that in the US or in Europe? I can well
> imagine that Mondex were told the float would be
> regulated ... because they based their business
> case on such float capture issues and tried to
> reserve it to Mondex International. Such an
> amusing selling technique :)

the central banks I remember making the statement were mostly in europe. many of the "stored value" digital cash systems are at least partially based on float providing financial incentive.

one of the big issues in the early e-check operation was whether the funds would settle immediately electronically or take several days. some of the financial institutions were use to the float operation of the physical check world. this was also raised in the recent check21 mandates and how long would it take funds to actually settle.

with respect to mondex, we had been asked to design and cost an infrastructure for a national deployment ... as part of that we also did a business analysis of the financials. they were looking at charging fees for fund transfers into the card as well as loosing the float. part of this was that the float (originally) effectively all rolled up to mondex international ... so the other institutions in the infrastructure had to cover their costs by other mechanisms.

misc. past posts mentioning float and/or mondex
ttp://www.garlic.com/~lynn/aadsm6.htm#digcash IP: Re: Why we don't use digital cash
http://www.garlic.com/~lynn/aadsmore.htm#eleccash re:The Law of Digital Cash
http://www.garlic.com/~lynn/aepay11.htm#42 Bank Float May Sink
http://www.garlic.com/~lynn/aadsm14.htm#7 Bank Float May Sink
http://www.garlic.com/~lynn/aadsm21.htm#1 Is there any future for smartcards?
http://www.garlic.com/~lynn/2004j.html#12 US fiscal policy (Was: Bob Bemer, Computer Pioneer,Father of ASCII,Invento
http://www.garlic.com/~lynn/2004j.html#14 US fiscal policy (Was: Bob Bemer, Computer Pioneer,Father of ASCII,Invento
http://www.garlic.com/~lynn/2005i.html#10 Revoking the Root
http://www.garlic.com/~lynn/2005u.html#29 AMD to leave x86 behind?
http://www.garlic.com/~lynn/2005v.html#1 Is Mondex secure?

Posted by Lynn Wheeler at May 8, 2006 11:43 AM
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