Electronic Money (e-money)

Is an electronic store of monetary value, based on a technological mechanism for holding and accessing fiat currency.

The ease of use of e-money has led to the increasing prevalence of this form of fiat currency and the decreasing use of cash in everyday transactions. Whilst e-money is backed by fiat and thus backed by a sovereign nation, it is apart from cryptocurrency.

The European Central Bank defined e-money as “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions […], and which is accepted by a natural or legal person other than the electronic money issuer“ in 2020.

‘Stablecoins’, a form of cryptocurrency assets that are typically backed by and pegged to one or more fiat currencies and may thus arguably fall into the category of a ‘cryptocurrency that is e-money’ if it were not for the fact that ‘traditional’ fiat e-money is claimable and that the redemption of it is backed by a country’s central bank – which stablecoins, and cryptocurrencies in general, are not. Some countries have raised issues with stablecoins whilst some so far have banned them. The People’s Republic of China for instance has made stablecoins pegged to the Yuan illegal.

With the increasing rollouts of Central Bank Digital Currencies of ‘CBDC’s, e-money will use the underlying technology of Bitcoin, the blockchain.

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