Private companies to issue ecash under EC proposals

The EC has proposed regulations which would allow private companies to issue electronic money alongside traditional banks. It aims to boost confidence in ecommerce so businesses and consumers can use the euro online, even before the last physical notes and coins are introduced in 2002.

An EC spokeswoman told Silicon News that internal market commissioner Mario Monti's proposal to broaden the EC's definition of a credit institution "was not a response to pressure from any direction". "But we are sure there will be a good response," she added.

Brian Capon, spokesman for the British Bankers Association, said: "We don't have a problem with this at all. Provided it is regulated properly, then competition is not a bad thing."

Companies wishing to issue ecash would need at least ECU500,000 as starting capital and will be obliged to make only low risk, highly liquid investments. They would be subject to supervision and initial authorisation from member states - although precise regulations have yet to be defined.

The proposals will now face lengthy scrutiny by the European Parliament and the EU Council of Ministers. Some opposition may come from the European Monetary Institute, which recommended in 1994 that only credit institutions should be allowed to issue pre-paid cards.