In one or two paragraphs, explain why digital cash is more ...

[segrsyd]

In one or two paragraphs, explain why digital cash is more popular outside the United States than it has been within the United States.

Question 2

Some digital cash products emphasize their freedom from the constraints of the banking system and government regulation. In about 100 words, outline the problems that can arise from this freedom and how they might affect the usefulness of such a product.

[duke02]

Answer to Question 1

Digital cash has not been nearly as successful in the United States as it has been in Europe and Asia. In the United States, most consumers have credit cards, debit cards, charge cards, and checking accounts. These payment alternatives work well for U.S. consumers in both online and offline transactions. In most other countries of the world, consumers overwhelmingly prefer to use cash. Because cash does not work well for online transactions, digital cash fills an important need for consumers in those countries as they conduct B2C electronic commerce. This type of need does not exist in the United States because U.S. consumers already use payment cards for traditional commerce, and these payment cards work well for electronic commerce.

Answer to Question 2

The use of digital cash provides no audit trail; that is, digital cash is just like real cash in that it cannot be easily traced. Because true digital cash is not traceable, another problem arises: money laundering. Money laundering is a technique used by criminals to convert money that they have obtained illegally into cash that they can spend without having it identified as the proceeds of an illegal activity. Money laundering can be accomplished by purchasing goods or services with ill-gotten digital cash. The goods are then sold for physical cash on the open market.