e-WorLDBiZ

Electronic currency (also known as e-money, electronic money, electronic cash, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. This involves use of computer networks, the Internet and digital stored value systems. Moreover, it is a collective term for financial cryptography and technologies enabling it.

There are two examples of electronic currency - Electronic Funds Transfer (EFT) and direct deposit. EFT refers to the computer-based systems used to perform financial transactions electronically. However, direct deposit refers to the electronic transfer of a payment directly from the account of the payer to that of the party being paid.

One rare success has been Hong Kong's Octopus card system which started as a transit payment system and has growth into a widely used electronic cash system. Singapore also has an electronic currency implementation for its public transportation system (commuter trains, bus, etc) which is very similar to Hong Kong's Octopus card and based on the same type of card (FeliCa). A very successful implementation is in the Netherland, known as Chipknip.



Future evolution
The main focuses of digital cash development are being able to use it through a wider range of hardware such as secured credit cards and linked bank accounts that would generally be used over an internet means, for exchange with a secure micropayment system such as in large corporations (PayPal).Theoretical developments in the area of decentralized money are underway that may rival traditional, centralized money. Systems of accounting such as Altruistic Economics are emerging that are entirely electronic, and can be more efficient and more realistic because they do not assume a zero-sum transaction model.

Pros
Electronic currency can provide many benefits such as convenience and privacy, increased efficiency of transactions, lower transaction fees, new business opportunities with the expansion of economic activities on the Internet.

Cons
The transfer of electronic currency raises disadvantages such as how to levy taxes or the possible ease of money laundering. There are also potential macroeconomic effects such as exchange rate instabilities and shortage of money supplies (total amount of digital cash versus total amount of real cash available, basically the possibility that digital cash could exceed the real cash available). These issues may only be addressable by some type of cyberspace regulations or laws that regulate the transactions and watch for signs of trouble.

References:
http://www.answers.com/topic/electronic-money
http://www.answers.com/topic/electronic-funds-transfer
http://www.answers.com/topic/direct-deposit