What is electronic money and is it real?

History of creating Electronic money

The first idea of digital cash was introduced at the end of 20th century by American computer scientist and cryptographer David Chaum. He invented the cryptographic primitive blind signature — the digital signature in which the content of a message is disguised (blinded) before it is signed. In the late 1980s when Cypherpunk movement began, his work “Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms” shared people’s vision about the future and laid the groundwork for the field of anonymous communications research.

Chaum’s invention allowed users to obtain digital currency from a bank and spend it in a manner that is untraceable by the bank or any other party. In 1988 he extended this idea to allow offline transactions that enable detection of double-spending. After seven years in 1990, he founded DigiCash to commercialize his ideas. DigiCash was an electronic cash company which offered an electronic cash application that aimed to preserve a user’s anonymity.

Origins of digital currencies date back to the 1990s Dot-com bubble. One of the first was E-gold, founded in 1996 and backed by gold. Another known digital currency service was Liberty Reserve, founded in 2006; it lets users convert dollars or euros to Liberty Reserve Dollars or Euros, and exchange them freely with one another at a 1% fee.

It was the start of the new era

Unfortunately, it isn’t true, such services were centralized, reputed to be used for money laundering, and inevitably shut down by the U.S. government. DigiCash filed for bankruptcy in 1998, because wasn’t able to maintain growing numbers of consumers.

So are electronic money forbidden now? And what it has to do with cryptocurrencies of today?

What is electronic money?

Electronic money is the inconclusive term that is used to describe all kind of actions: transactions, money keeping, where computer systems, data storage systems, and computer networks are involved.

The paradox of e-money is that from one side they are the instrument of payment and evidence of the issuer that need to be backed by real money on another.

The paradox can be described with the historical analogy — there was a time when we were using the only representative money, based on physical commodities such as gold or silver. And only after the Bretton Woods Agreement, it turned to FIAT.

What is ‘Electronic Money’ as seen by the European Central Bank?

“Electronic money is money which exists in banking computer systems and is available for transactions through electronic systems. Its value is backed by fiat currency and it can be exchanged into physical form however its uses are often more convenient electronically.

E-money products can be hardware-based or software-based, depending on the technology used to store the monetary value.”

Why it become so relevant now?

Over the past five years, the European Union’s progressive regulators have made it easier for leading challenger banks like N26 (based in Germany), Tandem Bank, Monzo, Starling Bank, Atom Bank and Revolut (all based in UK) to obtain the financial licenses necessary to operate.

Another important fact is that PSD2 implementation allows any third-party providers the opportunity to operate wherever they deem fit in the EU region as long as they are licensed at their homes, by their respective financial authorities.

Last important argument — such countries as Sweden leads the race to become a cashless society. According to the central bank, the Riksbank, cash transactions made up barely 2% of the value of all payments made in Sweden last year — a figure some see dropping to 0.5% by 2020. In shops, cash is now used for barely 20% of transactions, half the number five years ago, and way below the global average of 75%.

“I think, in practice, Sweden will pretty much be a cashless society within about five years,” said Niklas Arvidsson, an associate professor specializing in payment systems innovation at Stockholm’s Royal Institute of Technology (KTH).

Let’s face the truth, cash will soon be a part of our past lives and only the object in museum expositions!

Why Revolut is still using only EMI licence?

Atom Bank, Tandem Bank, Monzo, Starling Bank, and N26 obtained a full bank charter, which takes up to 2 years, but widens the services these banks can offer to their clients. In pursuing this time-intensive process, these challengers bet that a charter would build trust with consumers and allow them greater flexibility in building their offerings.

Electronic money institution license — permission issued by the Financial Conduct Authority (FCA) provides an authority to issue electronic money.

Revolut’s strategy, on the other hand, has been to get an e-money license which can be obtained much more quickly, thought the scope of services that can be offered is more limited. But it still doesn’t hold them to have the leading place by consumers demand.

So why Revolut is slowing down on obtaining the full bank license?

It seems for them it’s just easier to provide their services through big banks as Lloyds or Barclays. They create a convenient and great user experience with their app, but it’s only the front-end of banking.

We follow our competitors, to learn how to make a right product for You!

Our first goal is to get EMI

Our first priority is to obtain an EMI license in the UK that would allow us to issue our own electronic currency that’ll be used in everyday customers’ payments for goods and services. We will be able to issue payment cards, provide lendings and launch online banking.



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