Visa, MasterCard 'Antitrust' Settlement Is Anticompetitive

By Jon Matonis
PaymentsSource
Friday, February 22, 2013

http://www.paymentssource.com/news/visa-mastercard-antitrust-settlement-is-anticompetitive-3013321-1.html

As part of last year's $7.9 billion preliminary settlement agreement in the class action against Visa and MasterCard, the card networks enacted a rule change allowing merchants to surcharge customers up to 4%. Effective Jan. 27, 2013, the optional surcharge is permitted on credit card transactions in an effort to defuse merchant allegations that the card brands were violating the Sherman Antitrust Act by unlawfully fixing interchange fees and rules.

The interchange fee structure of a four-party payment system is predicated on William F. Baxter's seminal piece from the 1983 Journal of Law and Economics. In this study, Baxter laid out the elements and cost structures for each of the participants in a four-party payment transaction – cardholder, issuer, acquirer, and merchant. Essentially stating that cost flowed principally to the issuer despite interest rates and annual card fees, Baxter economically justified the merchant (or acquiring) fee that would flow back to issuers now known as the IRF, issuer reimbursement fee.

Nearly 40% of Visa and MasterCard merchants are located in the 10 states that ban surcharging including California, New York, Florida, Texas and Massachusetts. Despite this and the proposed surcharging bans recently introduced in more than seven other state legislatures, it is easy to understand why some might see this settlement as a triumphant leveling of the competitive playing field.

"The biggest winners from the settlement are ordinary consumers," according to Todd Zywicki of George Mason University’s Mercatus Center. "Although some of the settlement's terms are potentially prone to abuse by retailers, most notably their new right to impose surcharges on those who use credit cards, it does affirm the core principle that interchange fees should be set by free markets and consumer choice rather than by judges or politicians."

Seemingly unaware of the historical reasons for creating the no-surcharge rule in the first place, Zywicki inverts the issue. Consumers are not the winners as the fee was always embedded into pricing and unfortunately this settlement does nothing to affirm free-market principles. Mandating no surcharges for the merchant participants of their early fledgling networks allowed the card brands to make them an all-or-nothing offer to entice novice cardholders. Had surcharging been permitted from the beginning, it would have been difficult to persuade cardholders, and therefore merchants, because consumers would be incentivized to stick with cash and check payments.

It's more likely that the card brands didn't want to permit merchants to offer discounts for cash transactions. Are they preventing card surcharges or are they preventing cash discounts? Is the glass half-full or is it half-empty? Maybe a “surcharge” is more palatable for consumers now if it is described as a discount for cash.

Sometime during the 1990s, when critical mass was reached and saturation occurred in the credit card payment networks, the tables were turned. Merchants no longer had to be persuaded to accept credit cards as a form of payment. At least in the U.S. and other developed payment markets, merchants realized the benefits of catering to consumer preference for cards and they didn't want to suffer by not offering that choice. The card brands’ acceptance strategy had come full circle, but the no-surcharging rule had not caught up.

With the all-or-nothing choice of "accept all payments at the same price or no card processing at all," once the "nothing" choice started to look relatively attractive, the card payment networks would be forced to open up. That's what alternative payment types such as Bitcoin start to permit. The card-branded networks would begin to see a disadvantage in prohibiting surcharging because all alternative forms of payment, including cash, must cross-subsidize the cards. This allows a non-card-accepting merchant to maintain a significant price advantage over a card-accepting competitor.

So market forces arguably would have eventually pushed Visa and MasterCard to permit surcharges. But the settlement, induced by class action litigation, is worse than superfluous. It is an unwarranted and unjustified encroachment into the practices of a private payment company. Just think of the lost capital and lost productivity of a seven-year, multi-attorney billing festival. Who do you think pays for that? Furthermore, this bit of central planning via the judicial system will remove the competitive advantage that alternative payment-only merchants like Bitcoin Store have now by forcibly removing the cross-subsidization that other merchants would have had to follow in accepting bitcoin or alternatives. If the natural market penalty for cross-subsidization is removed, then alternative payment-only merchants must begin to accept all payment types or lose business.

In a free market, payment networks would compete under their own network rules, not the government's or regulators’ rules. Sadly, the perceived pricing power referred to in the antitrust case stems less from alleged collusion among Visa and MasterCard’s member banks than from the multitude of state-granted privileges they enjoy that disadvantage new entrants (such as extraordinary bailouts for favored institutions, the notion of too-big-to-fail, generous deposit insurance, etc.).

The National Association of Convenience Stores, one of the plaintiffs in the case, rejected the proposed settlement for not going far enough, saying that the settlement failed "to introduce competition and transparency into a clearly broken market." While the merchant lobbyist’s reasons for believing this may not adhere to free market principles, it accidentally happens to be the correct legal and economic posture in this case because the settlement is anticompetitive. The answer, however, is not to coerce transparency and break the market even further.

Free market competition occurs at the macro payment system level – not within a given branded system by forcibly tinkering with the internal fees and surcharges and then declaring a win for consumers. No one is coerced into using a Visa or MasterCard product and merchants are not coerced into accepting plastic payments.

The problem of a payments oligopoly would solve itself because new market entrants would discover ways to bypass the entrenched networks entirely.

U.S. Secret Service Bans Certain Gold and Silver Coins On eBay

By Jon Matonis
Forbes
Saturday, December 15, 2012

http://www.forbes.com/sites/jonmatonis/2012/12/15/u-s-secret-service-bans-certain-gold-and-silver-coins-on-ebay/

eBay was contacted by the U.S. Secret Service sometime last month to remove the Liberty Dollar precious metal coins. Citing consistency with eBay's general policy of not listing counterfeit items, eBay spokesperson Ryan Moore confirmed the ban with Coin World.  The following email was sent to affected sellers when the systematic removals began:

"The United States Secret Service has requested the removal of all Norfed Liberty dollars on the eBay site as counterfeits. … Please do not relist this item(s). We appreciate that you chose to list this coin on our site and understand there was no ill intent on your part. Your listing fees have been credited to your account."

Real is fake and fake is real. That's pretty much the monetary world that we live in now as we are coerced to trade and pay taxes in the designated and one 'legitimate' State currency. Certainly, the U.S. Secret Service wouldn't want anyone purchasing pure (.999 fine) gold and silver medallions mistakenly thinking that they might be getting official and real money issued under the authority of the United States.

Deriving its authority from Title 18 of the United States Code, Section 3056, the United States Secret Service is one of the nation's oldest federal investigative law enforcement agencies and it was originally founded in 1865 as a branch of the U.S. Treasury Department to combat the counterfeiting of U.S. currency. In addition to its mandate of protecting the president, vice president, and others, the U.S. Secret Service is responsible for maintaining the integrity of the nation's financial infrastructure and payment systems:

"The Secret Service has jurisdiction over violations involving the counterfeiting of United States obligations and securities. Some of the counterfeited United States obligations and securities commonly investigated by the Secret Service include U.S. currency (to include coins), U.S. Treasury checks, Department of Agriculture food coupons and U.S. postage stamps."

Rather than the beginning of a second wave of gold confiscation, this action to remove coins at eBay and other sites is aimed directly at NORFED Liberty Dollars issued from the now defunct mint of monetary architect Bernard von Nothaus who was convicting of counterfeiting in 2011. For those that haven't followed every twist and turn of this landmark case, I would recommend the amicus curiae brief filed by GATA, the brilliant piece from Lew Rockwell, and the possible implications of the von Nothaus case on other attempts to start a new currency.

The State's nervousness with alternative money creation extends far beyond the lookalikes and the replicas. It goes to the heart of creating a new monetary system evidenced by the targeted shut down of systems that achieve significant market adoption or present an embarrassing dilemma. At issue in the von Nothaus motion to set aside his conviction is the larger constitutional question of whether the government has the power to outlaw the private coinage of money.

Presiding over one of the most egregious assaults on monetary freedom in history, District Court Judge Voorhees still has not set a date for the von Nothaus sentencing. In announcing the verdict, U.S. Attorney Anne M. Tompkins declared:

"Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism. While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country. We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government."

"It's a loser's game to suppress private money that is sound in order to protect government-issued money that is unsound," writes Seth Lipsky in the Wall Street Journal.

For budding monetary entrepreneurs that may be seeking legitimacy to avoid von Nothaus' fate, Robert Murphy of the Mises Institute points out the folly of searching for legal loopholes because "if any attempts to circumvent the dollar actually got off the ground, then the government would find some legal pretext to shut it down." If a competing system posed a genuine threat to its monopoly on money, the government would find a way to prosecute it, "meaning no entrepreneur would spend the resources and time trying to launch an alternative system."

Decentralized and digital currencies without a single point of failure are starting to show some resiliency to arbitrary and capricious shutdowns.

Political freedom can only be preceded by economic freedom which is preceded by monetary freedom. And, critical elements of monetary freedom are currency competition and the right of private coinage. We need more entrepreneurs that rely on the free market, not the law, as their weapon of legitimacy.

For further reading:
"Thoughts On The Liberty Dollar Debacle", Brandon Smith, undated

ECB: “Roots Of Bitcoin Can Be Found In The Austrian School Of Economics”

By Jon Matonis
Forbes
Saturday, November 3, 2012

http://www.forbes.com/sites/jonmatonis/2012/11/03/ecb-roots-of-bitcoin-can-be-found-in-the-austrian-school-of-economics/

The ECB (European Central Bank) has produced the first official central bank study of the decentralized cryptographic money known as bitcoin, Virtual Currency Schemes. Ignoring for a moment the ECB's condescending and derogatory use of the virtual currency phrase and scheme phrase, the study produced at least one landmark achievement.

In claiming that "The theoretical roots of Bitcoin can be found in the Austrian school of economics," the ECB forever linked Bitcoin to the proud economic heritage of Menger, Mises, and Hayek as well as to Austrian business cycle theory. This recognition is also a direct testament to the monetary theory work of Friedrich von Hayek who inspired many with his 1976 landmark publication of Denationalisation of Money.

Bitcoin fully embodies the spirit of denationalized money as it seeks no authority for its continued existence and it recognizes no political borders for its circulation. Indeed according to the report, proponents see Bitcoin as "a good starting point to end the monopoly central banks have in the issuance of money" and "inspired by the former gold standard."

Economists from the 19th and mid-20th centuries can be forgiven for not anticipating an interconnected digital realm like the Internet with its p2p distributed architecture, but modern economists cannot be. From their own conclusions (on page 48) which inaccurately lump Bitcoin together with Linden Dollars, here is what the modern-day economists at the ECB are still not getting:

1. ECB concludes that if money creation remains at a low level, bitcoin does not pose a risk to price stability. This is incorrect on two levels. One, the creation of new bitcoin is capped at 21 million with eight current decimal places so it grows through adoption and usage rather than monetary expansion. And two, as with gold, silver, and other commodities having a monetary component, price stability is a function of the market not central planners;

2. ECB concludes that bitcoin cannot jeopardize financial stability due to its low volume and limited connection with the real economy. Conversely, bitcoin will tend to increase financial stability and overall soundness. Bitcoin's connection with the real economy is only a concern for the regulated and taxed economy, whereas bitcoin independently may thrive in the $10 trillion shadow or "original" economy. Besides, with its repeated market interventions, no one has done more to jeopardize financial stability than the ECB itself;

3. ECB concludes that bitcoin is currently not regulated and supervised by any public authority. It would be more accurate to say that State-sponsored regulation is largely irrelevant because of the inherent design properties of a peer-to-peer distributed computing system. But happily, this is still a conclusion that I can agree with and recommend that it remains the case;

4.  ECB concludes that bitcoin could represent a challenge for public authorities, given the legal uncertainty and potential for performing illegal activities. While public authorities will certainly be challenged by the introduction of a monetary unit that cannot be manipulated for political purposes, bitcoin in some cases does have the ability to provide tracking capability that far exceeds that of national cash or money substitutes. What authorities will find most troubling though, with bitcoin, is that money flows between individuals and businesses will no longer be exploitable for purposes of unlimited identity tracking and unconstitutional 'fishing expeditions';

5. ECB concludes that bitcoin "could have a negative impact on the reputation of central banks, assuming the use of such systems grows considerably and in the event that an incident attracts press coverage, since the public may perceive the incident as being caused, in part, by a central bank not doing its job properly." Pretentious as it may seem, the ECB is stating here that central banks as protector of the general public with respect to payments have a role to play because it is their reputation that suffers in the event of a bitcoin-related security incident. Firstly, that is an assumed responsibility -- not a delegated responsibility; and reputational impact aside, I would prefer to rely on lex mercatoria;

6. ECB concludes that bitcoin does indeed fall within central banks' responsibility as a result of characteristics shared with payment systems. Of course it does not. Central banks are a form of centralized economic planning so their stated responsibilities are suspect from the outset. Bitcoin represents an intangible math puzzle whose existence is solely restricted to transfer rights on a cloud-based public ledger. It more closely resembles an air guitar than a payment system for purposes of oversight.

Now, in affirming the superior attributes of bitcoin in the role of financial innovation, the ECB correctly identifies why the profligate issuers of national fiat currencies will ultimately feel threatened by such a decentralized nonpolitical unit. The report acknowledges the following with respect to bitcoin: (a) "higher degree of anonymity compared to other electronic payment instruments," (b) "lower transaction costs compared with traditional payment systems, and (c) "more direct and faster clearing and settlement of transactions" from the absence of intermediaries.

Overall, the fear of the monetary overlords is palpable as the study concludes by basically promising continued scrutiny and oversight. Also forecast for the plebeians is a possible remedy to the global scope and unclear jurisdiction of the regulatory challenge:

"One possible way to overcome this situation and obtain some quantitative information on the magnitude of the funds moved through these virtual currency schemes could be to focus on the link between the virtual economy and the real economy, i.e. the transfer of money from the banking environment to the virtual environment. Virtual accounts need to be funded either via credit transfer, payment card or PayPal and therefore a possibility would be to request this information from credit institutions, card schemes and PayPal."

However, Michael Parsons, a former executive with Emirates Bank (Dubai), Moscow Narodny Bank, and KPMG Moscow, believes that those efforts will prove futile and he explains, "Bitcoin is 'regulated' by its peers and mathematics. And Bitcoin is not a currency like fiat money. It is a value  transfer system which is given value only by its users. So the ECB, FED, etc. have no mandate to control a 'virtual currency' just because they call it (bitcoin) that! It will just go underground. Bitcoin is like Light and Air. Free to use and transfer. Owned and issued by the people and NOT the State!"

It evokes an image of central bankers huddled comfortably on the safe shoreline as they look out into the horizon and see the dangerous, unstable virtual currencies approaching. The opposite is actually the truth because it is the central bankers who are floating precipitously out at sea. As James Turk famously said about bitcoin's analog cousin, "When standing in a boat and looking at the shore, it is the boat (currencies) – and not the land (gold) – that is bobbing up and down."

Bitcoin, Gold and Competitive Currencies

You don't want to miss this thought-provoking James Turk interview with economist and trader Félix Moreno de la Cova.

Gold is simply analog bitcoin and, as gold bugs become more aware of that fact, two things will become more apparent. First, that specie-backed digital currencies will always be subject to trust in the custodial issuer, and more importantly, trust that the specie won't be confiscated or seized. Second, a transfer of wealth from national currencies to cryptocurrencies is occurring which will dwarf the transfer of wealth occurring in the precious metals sector. Enjoy.



For further reading:
"Ding, Ding, Ding! James Turk Gets It!", BitcoinMoney, September 20, 2012
"GoldMoney: James Turk in conversation with Félix Moreno de la Cova", Bitcoin Forum, September 14, 2012

Digital Currency Systems: Emerging B2B e-Commerce Alternative During Monetary Crisis in the United States

By Constance J. Wells, M.S. Aspen University Tuesday, February 8, 2011

From the Abstract:
Digital currency systems form the triumvirate nexus of government policies, money, and technology. Each has a global reach and responds to the needs of business and consumers. E-commerce depends on private and government financial institutions to enable payment transactions; the basis of e-commerce. As the United States financial crisis continues B2B enterprises may need to abandon traditional payment transaction systems and look to alternatives, in the form of Web based digital currency systems accessed via the Internet. The various types of digital currency systems generally fit into five categories: Barter Exchange Software Systems, Non-Bank Digital Currency Payment Systems, Digital Precious Metal Systems, Online Value Transfer Software Systems, and Online Stored Value Transaction Software Systems. Digital currency systems are not online banking. Digital currency systems use private electronic monies: electronic tokens, barter-exchange currencies, digital cash, and stored value e-cash vouchers. We explore the history of money against a backdrop of banking and government policies that cause cyclic monetary crisis's, how these current digital systems operate, how business can thereby benefit in their use, and why digital currency systems are such an underutilized service in the United States.

Digital Currency Systems: Emerging B2B e-Commerce Alternative During Monetary Crisis in the United States

View more documents from cjwells

DGC Magazine Interview with gBullion

Mark Herpel of Digital Gold Currency Magazine has completed his interview of gBullion, a new digital currency issuer that burst onto the scene in March 2010. Christine Thompson, PR and Marketing Communications Manager, answers the questions in this DGC exclusive and reveals important jurisdictional considerations and physical server locations of the gBullion system.


DGC Magazine Interview with gBullion

China's Online Payment Firms Edgy Over Regulation

By Ma Jingying & Wang Shanshan
Caixin Online
Thursday, May 13, 2010

http://english.caing.com/2010-05-12/100143296.html

BEIJING -- China's third-party payment industry has been around for more than a decade, but nearly half of that period has been shadowed by unfinished plans to regulate the sector.

Most of today's more than 300 players are private enterprises, and collectively, they deal with tens of millions businesses and individuals every year. Last year, more than 580 billion yuan ($84.9 billion) in transfers were recorded. These companies also provide payment mediation and settlement services.

Despite the sector's size and growth, however, the government has delayed finalizing formal regulations. Until now, the central bank has done little more than request public comments on draft payment and settlement regulations, as well as electronic payment guidelines, released way back in 2005.

The page may turn soon, but that hasn't settled concern that smaller companies may lose out to industry giants. A source close to central bank authorities told Caixin that final regulations may be released before July. Caixin also learned a central bank payment system linking many of the nation's big commercial banks -- but perhaps not third-party payment firms -- will come online in August.

Meanwhile, payment companies across the country are waiting to see how the changes may affect their bottom lines.

Major participants such as Alipay hope the measures formally validate their profitable businesses. But smaller competitors worry about being locked out by high entry barriers, and finding their huge investments going to waste.

Successful business model

Third-party payment companies have grown quickly to satisfy the cash-flow needs of the e-commerce industry. They generally function as money gateways and "transfer stations" between merchants and banks.

The model's earliest domestic practitioner was the semi-official PayEase, formally called the Capital E-commerce Project. It was jointly launched in November 1998 by the Beijing Municipal Government, Bank of China, the State Internal Trade Bureau and central ministries, including the Ministry of Information Industry.

An independent third-party payment company called Central iPS was launched two years later in Shanghai. That was followed by a March 2002 agreement by the State Council, with central bank approval, to create Union Pay and its ChinaPay Services Ltd.

PayEase, iPS and ChinaPay followed the same basic business model by charging merchants for access to online money transfers. But the model was shaken when basically no-fee payment companies led by Alipay and Tenpay -- a service of online-game and messaging provider Tencent -- joined the race.

By doing business with platforms such as Tencent and online-shopping giant Taobao, payment companies evolved into "credit intermediaries." Going through a third party effectively resolved trust issues inherent in online transactions. And due to their interdependence, the online-shopping and third-party payment businesses developed in tandem.

Transaction levels started to swell five years ago, doubling in a year to more to 16.3 billion yuan in total market value in 2005 and building to an astounding 581 billion yuan last year. Analysys International forecasts online payment will continue to soar, reaching 886 billion yuan this year, 1.25 trillion yuan in 2011 and 1.67 trillion yuan in 2012.

Regulation delays

But the industry is practically operating in a regulatory vacuum. The government rewrote its 2005 regulatory proposal in 2007, and sources told Caixin that proposal was revised last year. The latest version includes rules for market access and risk control.

"The current copy of the regulation is completely different compared to the 2005 draft," said a senior industry source. "Because the industry is so new and growing quickly, regulators have to keep up."

Companies have long been anxious about these government delays, especially when it comes to issues surrounding business licenses. Some companies thought the central bank was rolling with a licensing process a year ago, when it started collecting records from third-party payment companies and convened a National Association for Payment Clearance meeting.

But one source said only 130 of the nation's more than 300 payment firms submitted records for the process, which reflected "the central bank's effort to collect basic information from these third-party payment companies in terms of capital, business methods and profits." And that's as far as the process went.

"In our communication process with the central bank, we expressed our hope for clarification on a few points: What can't be done, what can be done better, and what has been done wrong in the past and needs to be corrected," said Alipay Chief Executive Officer Peng Lei. "On these points, we hope for regulatory guidance."

The impending arrival of the central bank's so-called Super Online Bank has thrown another variable into the mix. The "bank" is actually an Internet application system connecting online banks to the central bank's China National Advanced Payment System.

"This is the equivalent of adding a safety valve," said a banking source. "Online banking services offered by various commercial banks will no longer individually connect to the central bank's core payment settlement system, but will instead connect through the Super Online Bank unified access point."

Interview with EuroGoldCash.com

From Realforum
Sunday, May 16, 2010

http://moneyfacture.com/forum/content.php/13-Interview-with-John-of-EuroGoldCash.com

Hi. Could you please introduce yourself to the readers of Realforum and tell us about what your personal involvement with eurogoldcash is? Maybe you could also introduce us to some of the senior staff members that are working for you. Who are they and what do they do?

Not counting our team of programmers, EuroGoldCash has several full-time executive-level employees including myself. We share responsibility for the efficient and secure performance of the EuroGoldCash system. We also have support staff, full-time and part-time, that handle customer service inquiries, lost password retrieval, and other issues.

Can you also give us some background information on EGC? Just the basics, like how long are you in operation?

EGC is in operation since 2008, but EGC management's background comes from the digital currency industry since its inception in the old days of e-gold (1999). Our management has more experience in the market than any other system's management except e-gold.

Where are you based and how many people are working for you? Why did you start the company and did you ever expect to be so popular? Just how popular are you by the way? (How many active accounts do you have?)

We are registered in Panama, but our main headquarters are in Europe.

We started EGC in order to fill a void in the market for private financial transactions in a secure, honest, and multi-jurisdictional venue. Most digital currencies block accounts or do other things with their system to restrain the free flow of money. Our founders believe that the transfer of value (money, gold, other metals) should be free, and flow easily throughout the internet.

As for our popularity, it is increasing steadily. Within the first year of EGC's inception, EGC already had over $1 million of value in trust for our clients. For client privacy reasons, we do not reveal the number of accounts. We can only say that they are growing exponentially.

Would EGC consider some form of chargeback system in the event of a scam?

All systems, including LR, have a "chargeback system in the event of a scam." Barring a few fraudulent currencies out there, no digital currency, EGC included, wants to reward scams. But how do you prove
that a scam exists? Who will be the judge and jury? Which officer should we appoint to decide who's account is frozen and who's isn't?

With thousands or even millions of daily transactions, it is impossible to decide, effectively, what is fraud and what is not. A hit-or-miss policy is also not acceptable because we believe that no innocent account should ever be blocked for no good reason.

Therefore we rely on outside courts to investigate fraud. We respond to correctly filed subpoenas from a court of legitimate jurisdiction. For more information about this, it is best for users to review our terms of service.

If more payment processors did this maybe scammers would think twice about their activities.

From our experience, scammers and fraudsters think twice, three times, and even four times, but all about the same thing: how to do more and better scams. There is no better way to find scams than to have a buyer beware attitude which is why EGC has a page warning users to beware of various types of scams and frauds. This page can be found here: http://www.eurogoldcash.com/info_pag...umerAlert.aspx

Is it possible to freeze an account and issue refunds?

Unlike other systems, we follow our terms of service. We may freeze an account, but only if we receive a properly executed subpoena. We have other anti-scam and anti-fraud measures that help our users, but they are proprietary and we cannot reveal them.

I am a eurogoldcash member and appreciate their services. I have noticed that EGC is not a favorite of a lot of HYIP's. Any idea why and what could be done to improve EGC status?

I am not sure that having EGC become a "favorite of a lot of HYIPs" will improve its status.

We allow all users to use our system, including HYIPs (which we consider gambling businesses), but we are not directly reaching out to HYIPs (like other competing systems are doing). Instead, we are concentrating on acquiring mainstream online businesses such as casinos, ForEx, hosting, and others, and we are successful with this strategy.

From our experience, we know that more HYIP businesses will be using our system whether we actively reach out to them or not. One thing we learned about HYIPs is that they know a good thing when they see it, and they love secure, private financial transactions. That is what EGC is all about.

We have recently finalized a contract with the largest mainstream ForEx broker in industry to use EGC: http://www.pfgbest.com/

PFGBEST is larger than any other ForEx broker in the digital currency industry, and they have chosen EuroGoldCash.com, exclusively, to provide their users with the ability to fund their PFGBEST accounts online.

We are adding several legitimate, medium to large clients every week including the popular CaptainsGames.com casino, which is adding EGC to their accepted currencies shortly.

Who do you see as your main competitors? AlertPay or StrictPay or LR?

Neither and all of the above. We built EuroGoldCash to be the best, both in technology, design, security, privacy, and functionality. We are not overly concerned with competition. We have a global strategy to provide the best service and best value to our customers. We have the best and most experienced management of any functioning digital currency. We also, through our incentive program for exchangers, are
the cheapest currency to buy for users. We know that the choice is clear. Most users will realize it as well sooner or later.

What do you think of other online processors in general? How trustworthy would you find them and what makes EGC so much better?

I think one should go to www.gdcaonline.org to check out any trust issues with digital currencies. Even if we did have strong opinions about the trustworthiness of a particular digital currency, it would be unprofessional for us to voice them.

Speaking only on behalf of EGC, I can say that we are built on trust, privacy, and security. There is no better system out there than EGC.

The recent emergence and relative (and growing) popularity of GlobalDigitalPay would seem to indicate that this is still very much a thriving and lucrative business as well as highly competitive. Has this affected your own business in any noticeable way? How are you planning to keep EGC competitive in the future? Will there be significant changes made in the company?

Again, we do not consider the fact that a bunch of HYIPs accepting a digital currency is necessarily a good thing, though it does make the currency "seem" popular. We are concentrating on gaining legitimate
clients. We are not looking for a bunch of new accounts to be opened and then 95% of them to be closed or abandoned within a month or two after an HYIP closes. This is not a good foundation for a long-term strategy. We do not turn away HYIPs (or anyone else from using EGC), and we do have many HYIPs adding EGC already, but we are not chasing after them.

Reprinted with permission from realforum.co.il

Digital Precious Metals Consistently Under Attack

The digital precious metals and digital currencies continue to come under attack from the anti-money laundering profession. In the latest U.S. study by Saskia Rietbroek of AML Services International, LLC, "Emerging money laundering methods: Digital precious metals" (November 2009), the anonymity is cited as the lure for criminal behavior without any deference to legitimate financial privacy or monetary freedom. This is a serious impediment to widespread digital currency adoption and it must be factored in when considering physical and legal jurisdiction for issuers. Rietbroek writes:

"With digital currencies you can move money internationally in a manner that approximates money remittance or wire transfers. Digital currencies are denominated into internationally recognized weights of precious metals, such as gold or silver. You can open an anonymous digital precious metal account online. A digital precious metal account is very much like an online bank account except your funds are held in precious metal and not paper currency. The balance on your statement is denominated by weight in grams of gold and not dollars or euro."

"Anonymity is heavily marketed characteristic of the digital currency industry. Because digital currency accounts are obtained online and are not subject to the customer identification procedures associated with obtaining a traditional bank account, they often can be opened and funded anonymously."

Unaware that digital currencies via international exchangers will one day supplant anonymous but cumbersome paper cash to fuel the digital economy, Rietbroek continues:

"To fund the account, you can use wire transfers, money orders, or by making cash deposits directly to an exchanger's bank account. Many exchangers will convert digital currency balances into anonymous prepaid (stored value) cards that can be used to withdraw funds by various methods, including at ATMs all across the world."

"The anonymity and international features are very attractive to a money launderer. Digital currency accounts also allow individuals to execute multiple currency-to-currency exchanges in a short period of time and therefore they can become an ideal layering mechanism."

Digital Currencies Declared Central to Underground Economy

By John Leyden
The Register
Thursday, October 22, 2009

http://www.theregister.co.uk/2009/10/22/soca_fbi_cybercrime_strategy/

FBI and SOCA plot cybercrime smackdown
White hats get proactive on e-crime

RSA Europe 2009, London -- The FBI and the UK’s Serious and Organised Crime Agency have drawn up a program for dismantling and disrupting cybercrime operations. The effort relies on a better understanding of the business models of carders, malware authors and hacker groups which have increasingly come to resemble those of legitimate businesses.

The three prong strategy aims to target botnet and malware creators, so-called bullet-proof hosting providers that offer hosting services to cybercrooks, and digital currency exchanges. Digital currency exchanges such as WebMoney and Liberty Reserve are central to the operation of the black economy, according to Andy Auld, head of intelligence at SOCA’s e-crime department.

During a keynote presentation at the RSA Europe Conference, Auld and FBI special agent Keith Mularski used the Russian Business Network (RBN) cybercrime network as an example of the type of criminal enterprise they were targeting. The now disbanded group used an IP network allocated by RIPE, a European body that allocates IP resources, to host scam sites, malware and child porn.

RIPE actions might lend themselves to interpretation, viewed in the harshest terms, as being complicit with cybercriminals and "involved in money laundering offences".

"We are not interpreting it that way. Instead we are working in partnership to make internet governance a less permissive environment," Auld said.

The RBN – described as a purpose-built criminal ISP – allegedly paid off local police, judges and government officials in St Petersburg.

"This was a well organized organization not a cottage industry,” Auld explained. “RBN was the e-crime component in a wider criminal portfolio.

“There were strong indications RBN had the local police, local judiciary and local government in St Petersburg in its pocket. Our investigation hit significant hurdles.”

Auld said that although western law enforcement efforts were frustrated, the group was put under surveillance for a short time, during which the group travelled around the Russian city in an Armoured Audi A8 that was always escorted by a Range Rover.

As the heat was turned up on RBN, the group applied a disaster recovery plan, activated in November 2008. However, foreknowledge allowed the FBI and SOCA to shut down new systems before RBN was able to complete its migration.

“All we achieved was disruption, not a prosecution,” Auld explained. “We believe RBN is back in business, pursuing a slightly different business model.”

Zombie botnet taxonomy

The well attended presentation also included a comprehensive taxonomy of botnet types. Network of compromised PCs can be used for multiple purposes include proxies that supply anonymity (based on machines infected by malware strains such as Xsox), credential stealing (the notorious banking Trojan ZeuS and Torpig being the chief irritants in this category), web hosting (ASProx), spam distribution (Srizbi, Storm worm) and malware dropping botnets.

Another vital component of the cybercrime economy is carder forums, described by Mularski as e-crime “supermarkets” for exploits, tools and stolen data that have adopted a mafia-style organisational structure. These forums have splintered after law enforcement efforts that led to the demise of forums such as Shadowcrew and Carderplanet in 2004.

New generation forums are split between Russian and English language sites. Each have hierarchical structures with administrators who take a percentage for running escrow services and control membership at the top. Below these bosses are reviewers who handle site management (capos).

Hackers, carders and data thieves occupy the rung below with mainstream members (associates) below them. The quality of stolen credit card data, for example, is reviewed before a vendor is allowed to sell through these forums.

Counteroffensive

SOCA and the FBI intend to infiltrate groups or cultivate inside sources. The law enforcement agencies will also go after the money by targeting electronic exchanges that are used to transfer funds between criminals. Working with internet governance organisations, such as groups that allocate IP addresses to crooks without realising that the address space will be used for cybercrime, also form part of the clampdown.

The two law enforcement agencies also want to encourage the targets of cybercrime to improve their security while going after locations where crackers upload and store stolen data.

“Traditional policing is reactive,” Auld explained. “Cybercrime enforcement, by contrast, has to be pro-active.”

For further reading:
"FBI and Soca need help", ComputerWeekly, October 22, 2009

DGC Magazine Visits WebMoney Transfer in Moscow, Russia

DGC Magazine visited WebMoney headquarters in Russia for this October 2009 WebMoney Transfer Special Issue, which focuses on one of the premier companies in the digital currency business. Excerpt from DGC Magazine:

"Experts estimate that in 2008 there were 0.6 bank cards per Russian citizen. In comparison, the worldwide average is more than three cards per person. The online payments software is very much a part of everyday life for many Russians."

"Webmoney Transfer is a family of products created by knowledgeable professionals with backgrounds in the daily business practices of the Russian people and consumers in former CIS countries. The products, the operation and the regulatory framework for this dynasty started in Russia and are based on the changing Russian economic model. When the company first began operations in 1998, the Internet was brand new, cell phones were very expensive & the online payment industry was still in diapers."

"Can you imagine 200,000 cash-in terminals throughout New York City that would accept cash and instantly credit a PayPal account, or pay a utility bill? This type of payment terminal is far superior to anything found in the United States."

For further reading:
"Interview with WebMoney, Best Payment System 2008", Ecommerce Journal, March 10, 2009
"Webmoney Interview: Peter Darakhvelidze", DGC Magazine, October 22, 2008
"Interview with Alexander Fedotov of WebMoney", Planetgold.com, June 3, 2002

Issuer Market Update - September 2009

By Jon Matonis

The Issuer Market Update is a periodic snapshot of active digital gold currency issuers. Only those issuers and currencies that have precious metals backing are included in the analysis, although some issuers may also offer non-metal digital currencies.

Additionally, I have included each issuer's date of founding and the legal jurisdictions for administrative, operational, and guarantor entities, if applicable. Certain companies below will be the focus of issuer highlight studies in the future. Please bear in mind that not all issuers are forthcoming about the full details of their legal and control structure -- a fact that I believe puts them at a relative disadvantage.

1. c-gold (2007) - Seychelles, Malaysia
   
2. e-dinar (2000) - Dubai, Malaysia
3. e-gold (1996) - Nevis, USA
4. EuroGoldCash (2008) - Panama
5. GoldExchange (2006) - Costa Rica
   
6. GoldMoney (2001) - British Channel Islands
7. GoldNowBanc (1999) - unknown jurisdiction
8. Gold-Pay (2008) - Panama, Costa Rica
9. iGolder (2009) - Belize
10. Liberty Reserve (2005) - Costa Rica
11. Pecunix (2001) - Panama, Vanuatu
12. Perfect Money (2007) - Panama
13. WebMoney (1998) - Belize, Lithuania, Russia, Dubai

Interviews with Issuers:
"Interview with c-gold", DGC Magazine, June 19, 2009
"Interview with iGolder", DGC Magazine, April 16, 2009
"Interview with e-gold", DGC Magazine, March 20, 2009
"Interview with Gold-Pay", DGC Magazine, March 20, 2009
"Interview with Perfect Money", Ecommerce Journal, January 23, 2009
"Interview with e-dinar", DGC Magazine, October 22, 2008
"Interview with WebMoney", DGC Magazine, October 22, 2008
"Interview with GoldMoney", DGC Magazine, October 22, 2008
"Interview with Liberty Reserve", Planetgold.com, May 20, 2002

Visit to Perfect Money Office in Panama

By Mike Seltman
Ecommerce Journal
Friday, August 21, 2009

http://www.ecommerce-journal.com/articles/17608_visit_to_perfect_money_office_in_panama_how_was_it

It has become something usual for Ecommerce Journal edition to conduct journalistic investigation sending its reporters to the offices of different payment systems across the world. So far we have made certain that the Internet users are misled by such payment services as Liberty Reserve, Alter Gold, Numox, EcuMoney and others. This time we decided to check up whether the information about the office of Perfect Money Finance Corp. which is acting at the payment systems market as Perfect Money is authentic.

According to the allegations of the payment system Perfect Money its brick-and-mortar office locates in Panama. Full address as well as glossy photographs of its headquarters the company demonstrates in the special section on its website.

Having just these photos and address information was not enough for us to be sure in reliability of these data. Thus we decided to make a visit to Perfect Money. First, we sent a letter of inquiry to the Support Service asking it to arrange for us a meeting at the office of the company. To our surprise we have received a confirmation.

A reporter of the Ecommerce Journal landed in Panama, the capital of the Republic of Panama, early in the morning and immediately headed for the place specified in the business address: Oficina 207, 2-do piso, Century Tower, Tumba Muerto, Panama, Republica Panama.

He reports: “Before my departure to Panama I consulted Google Maps service to get some idea of the appearance of the office where Perfect Money is supposed to be. After I started from the Panama airport towards the downtown I noticed the eminent building of Century Tower from afar.

“At the reception I was asked where I was going. When I said it was Perfect Money I was looking for they told me the number of the company office. The number turned to be the same as indicated in the address section on the company website. It was 207.

“I rang the bell and a nice girl opened the door. After greetings she invited me to the conference hall. Passing one room I cast a look through a chink and noticed that there were some people working at their desktops. I thought they were programmers or Support Team. Later I decided to verify if I was right and I was told that it was a finance department of the company.

“During our conversation the secretary told me about the future plans of the company as well as the history of Perfect Money Finance Corp. and she also destroyed some myths about the payment system. Well, the information I got wasn’t new to me, it just clarified my surmises. Of the information they provided I was allowed to publish only some facts. They told me that the company is actively upgrading its Support Team and in a short term they will enable Support Service in other languages with phone support.

“On the whole my visit to Perfect Money can be valued as quite successful. My suspicions that the legal address of Perfect Money is just an entry on the website have not been justified. I want to note only one thing. The office was rather small for such a large international company as Perfect Money. On the other hand, maybe it is just a peculiarity of our information era when modern corporations can work with customers all over the world via the Internet while having just a small offline office. In the end we paid our civilities and at a positive note I left the office of Perfect Money and a beautiful city of Panama.”

For further reading:
"Perfect Money VS Liberty Reserve. Which one is the better?", Ecommerce Journal, March 29, 2009
"Exclusive Interview with Perfect Money PR Director", Ecommerce Journal, January 23, 2009
"Interview with Perfect Money payment processor", Ecommerce Journal, July 7, 2008
"New E-Currency: Perfect Money - perfect or not? What are the roots?" Ecommerce Journal, April 18, 2008

Goldgrams Product is Not Anonymous

By Jon Matonis

Goldgrams® are the basic units of value within the GoldMoney system. One troy ounce of pure gold bullion contains 31.103 grams of metal, and one goldgram (gg) is equal to one gram. It's really not much different than a registered bank account or a gold bullion account in the United States. GoldMoney from Net Transactions Limited is regulated by the Jersey Financial Services Commission under the Financial Services (Jersey) Law of 1998 within the British Channel Islands. Jersey is an autonomous possession of the British Crown, and Britain is responsible for its external affairs including negotiations with the European Union. However, be careful because GoldMoney is not anonymous and it is not untraceable.

I realize that this article will tend to get a lot of people worked up, because James Turk and his crew have been dutifully serving the precious metals buying community for many years. It is an exemplary organization with superior customer service, top-grade insurance policies, and routine vault audits; however, it has two other features that do not serve it well as a potential leader in the emerging digital gold currency field.

First, GoldMoney follows the same know-your-customer rules with proof of identification that most banks around the world adhere to as part of FATF (Financial Action Task Force) guidelines. That puts GoldMoney at a serious disadvantage. For a digital currency to thrive and survive, it must possess, at a minimum, the same features that make a $100 bill and 500-Euro note so popular -- namely anonymity and untraceability. Otherwise, it is not true electronic cash but merely another traceable book entry that can be subpoenaed by governmental or taxation authorities.

Second, the physical and legal jurisdiction that Net Transactions Limited has selected for its base of operations, British Channel Islands, does not permit it to conduct operations in a way that would ever lead to a viable, circulating digital gold currency. Unlike admirable digital currency jurisdictions such as Panama, the British Channel Islands will blindly conform to both OECD and FATF guidelines in an effort to retain so-called legitimacy. GoldMoney has been neutered like e-gold, although sadly, with GoldMoney it was voluntary.

Therefore, far from being a promising digital replacement for the $100 bill and private money remittance services, GoldMoney has become a glorified bullion bank no different than Monex in the United States or BullionVault in the United Kingdom. Their future as a digital gold currency is seriously in doubt, because as Dr. David Chaum, founder of DigiCash Inc., boldly stated to Seth Godin in his Presenting Digital Cash (1995) interview:

"It really is not electronic cash unless your privacy is protected. That's the idea of cash. You don't have to reveal your identity to pay. Cash is the most popular payment system on the planet. It's something even kids know how to use. Its particular structure may have had one technological origin, but its now established as a fundamental payment system and certainly the most prevalent one. If you want to create an electronic thing that will replace cash, at least in cyberspace, then it should have all the features that cash has. It can have more features, but it can't have fewer."

In other words, be very afraid of the cashless society unless the privacy of paper cash is vigilantly maintained.

The Importance of Jurisdiction

By Jon Matonis

Today's digital gold currency issuers are the new Lydians. During the 6th century BC, the Aegean civilization of Lydia sparked a vibrant commercial revolution through the invention of coinage. The first gold coins were struck by King Alyattes and then by his son King Croesus of Lydia sometime around 600-560 BC, and the coins served as a primary currency which significantly increased trade and commerce in the region. Although the monarchy usurped the control of money and established the prerogative of issuance, it was the Lydian people and merchants that were not only responsible for the introduction of coinage but also the early formulation of a gold standard of value through private weights and measures.

It is not a stretch to imagine that the most successful non-political digital currencies also will have some type of precious metals backing. In a digital world where trust is craved, the currency issuers with the most reliable form of "auditable" backing will have a distinct advantage. However, the legal and territorial jurisdictions of the company's administrative offices, host computer servers, and physical bullion storage ultimately may play an even more important role.

To understand why this is true is to appreciate the nature of the attractiveness of digital currencies to the average account holder. It is much more than a desire to protect value that would otherwise be held in a depreciating government currency like the US Dollar or Euro, although that is important too. Not surprisingly, it extends equally into areas such as financial privacy, political stability, and protection from confiscation.

Economically and philosophically, the aim of pure digital cash is to replicate the transactional features of a $100 bill or a 500-euro note, which primarily means that it should be anonymous and untraceable. So, why do so many right-minded people object to these features in the online world? I am sure that they would not advocate mandatory photographs and audit trails for users of $100 bills. This is an extremely vital distinction because various commerce laws are being used by governments to violently suppress the online issuers of anything that is anonymous and untraceable. It would not be acceptable to eradicate $100 bills, or even $50s or $20s, so what becomes the difference in the online world?

The major difference is that online digital cash opens up a host of previously unavailable transaction types that will not require physical presence for the exchange of paper cash. It is this potential for customer-not-present transactions which strikes fear with the authorities, because of the "dire" consequences for tax evasion and money laundering, not to mention the darker side of blackmail, extortion, and ransom. Suitcases of cash will no longer be needed at predetermined drop-off points. There won't even be any drop-off points and therefore the frequency and value of all types of untraceable customer-not-present transactions will increase dramatically in an unregulated, "parallel" economy. The morally-positive transactions, such as political prisoner border crossings and tax-free exchanges, will coexist with the morally-negative transactions just as they do today. A parallel economy in the digital sphere has enormous implications for the world's taxation authorities.

We should not take for granted the privacy rights contained within a $100 bill -- they are a wonderful thing for freedom. Jurisdictions that embrace and permit these already-existing privacy features will attract digital currency issuers and therefore thrive in the online financial world. As to the associated morality of various transactions, it is no more the responsibility of the digital currency issuer than it is currently the responsibility of the manufacturer of $100 bills and 500-euro notes. Those types of arguments around judging and enforcing the morality of certain transactions only serve to muddle the true free-market argument for digital currency.

All of these political and moral sensitivities taken together demonstrate why jurisdiction is so vitally important to the emergence and survival of non-political digital currency. Authoritative forces are lined up against its emergence from the beginning, and there will be an ongoing high-stakes battle for survival, as recently observed in the U.S. federal case against e-gold being prosecuted as an unlicensed money transmission service. International governments and police forces will all cooperate with each other in a desperate attempt to retain monetary supremacy, so old laws will be tweaked to make them applicable, and new direct legislation will be enacted to fill any voids. This scenario will play out across the globe where the larger and stronger nations exert diplomatic, economic, and possibly military pressures on the non-compliant nations.

Not surprisingly, even the U.S. government recognizes that restricting digital currencies on the Internet will require unprecedented international coordination. As stated in a 2008 U.S. Department of Justice study on Money Laundering in Digital Currencies:

"U.S. regulatory action alone will not be sufficient to suppress the money laundering threat posed by digital currencies. Even if clear and consistent regulatory measures are imposed, digital currency services established in foreign and offshore jurisdictions—which are not subject to the Bank Secrecy Act (BSA)—can be used to conduct transactions in the United States. Limited international oversight of this expanding financial service is possible through a recommendation of the Financial Action Task Force on Money Laundering (FATF)."

To be sure, jurisdictional risk is but one of many risks in the digital currency business, with the others being technological risk, encryption/security risk, audit risk, fraud risk, and business default risk. But it is jurisdictional risk that has the most profound impact on long-term viability because it is the least correctable once launched. In addressing jurisdictional risk, the digital currency issuer must consider multiple jurisdictions for each of the functional areas and perhaps even two or more jurisdictions within each functional area for redundancy. For example, both a Central American country and an Asian country for location of hosting servers would provide load-balancing and continued reliability in the event of a changing political climate against anonymous digital cash server farms in one country.

Administrative offices may be part of a legal entity in a faraway, remote jurisdiction and have physical staff and buildings in a large, populated city, thereby placing them in a different territorial jurisdiction. Both jurisdictions are important to consider because both will have differing legal statutes related to the issuance and management of anonymous, untraceable digital currency. It is not the objective of this analysis to promote one jurisdiction over another, primarily because ideal jurisdictions will be in a constant state of change due to their political nature. However, it is possible to look at some selected jurisdictions of existing digital currency issuers.

One such issuer established a Panamanian international business corporation (IBC) as a holding company with a subsidiary Haitian company as the administrative general contractor and a subsidiary Burmese corporation as the payment system operator. In addition to distributing legal jurisdiction risk, this structure served to insulate the administrator from the business risks associated with default of the operator. Another issuer established the administrative body in the Seychelles with operations and customer support outsourced to a Malaysian company.

For administrative legal jurisdiction, Panama, Belize, Costa Rica, Nevis, and Seychelles have been popular because of their banking secrecy heritage, minimal tax structure, and/or their distance from the reach of the U.S. legal system. They are decidedly not one of the 32 member countries of the FATF international body. Establishing in non-FATF member jurisdictions can be a double-edged sword for the digital currency customers because untrustworthy issuers may be insulated from judgments related to fraud, so issuer reputation will be of paramount importance to overcome that concern.

In the case of territorial jurisdiction, it is not always clear where issuers maintain their physical presence because they have mostly been small, movable organizations capable of operating virtually. Diligence should be observed if loosely guiding or operating a digital gold currency entity from a shareholder's home country, such as the United States, because territorial jurisdiction will prevail regardless of where the corporate entity was formed. Since legal and territorial jurisdictions are different from an enforcement perspective, the issuer ideally should establish separate legal entities for each location.

For the location of international bullion storage, issuers have selected domiciles that have a longstanding reputation of storing precious metals, such as Zurich, London, and Vienna. Now, Dubai is an up-and-coming storage center for precious metals in that it is already one of the largest centers for trading gold managing one-fifth of global annual gold production. Geographic diversification in vault selection makes sense in a world where established financial centers have experienced increased pressure to eliminate financial privacy, and the threat of asset confiscation persists.

The complete jurisdictional framework for digital currency issuers is a multinational structure of various corporate entities that have either subsidiary relationships within the framework or pure outsourcing arrangements to separately-owned entities. They will function best when they have considerations for distributed risk and redundancy built in and when they utilize best-of-breed locations for the particular functional areas.

This article was also published in Digital Gold Currency Magazine (August 2009).

For further reading:
"Fab Four: The 4 Best Asset Havens in the World", The Sovereign Society, June 2008

One Global Digital Gold Currency...The Devil´s Work Indeed!

By Mark Herpel
American Chronicle
Thursday, April 2, 2009

http://www.americanchronicle.com/articles/view/96914

Digital Gold stands firm as a protector of personal wealth and value

I am constantly amazed at the bad information I see and read regarding digital gold or digital gold currency.

Senior Fellow, Director of International Economics and quite possibly the hardest working man over at the Council on Foreign Relations, Mr. Benn Steil, mentioned digital gold more than two years ago in his article, "Digital gold and a flawed global order". He offered a positive viewpoint and forward looking statements regarding the future of digital gold. Here is what Mr. Steil had to say:

Digitized commodity money may then be in store for us. Gold banks already exist that allow clients to make and receive digital gold payments—a form of electronic money, backed by gold in storage—around the globe. The business has grown significantly in recent years, in tandem with the dollar´s decline. As radical and implausible as it may sound, digitizing the earth´s 2,500-year experiment with commodity money may ultimately prove far more sustainable than our recent 35-year experiment with monetary sovereignty.

However, in the recent news headlines, it seems that not everyone completely understands Digital Gold Currency and the powerful role it can play in everyday commerce.

This month I have been inundated with no less than 36 Skype discussions and emails regarding Mr. Bob Chapman´s piece from "The International Forecaster" and GoldSeek news. The article is entitled, "Staggering Deficits In A Depressionary Economy". [1]

How did Mr. Chapman, or anyone for that matter, get the ridiculous idea that Digital Gold Currency is big government´s global tool to control and spy on the population?

Who said that digital gold will allow governments to control every aspect of my life? Ridiculous!

In the past decade, Digital Gold Currency has been a safe private banking and commerce financial tool for millions of users. It has only been, in just the last 36 months, that the U.S. Government has made an attempt to regulate its use within their borders. The wild prediction that there could, should or would ever be ONLY one digital world currency backed by gold is laughable.

Private Digital Gold Currency companies have been in operation for more than ten years. DGC (digital gold currency) is a private value transfer solution which is always issued by a business and not a government agency.

Digital gold is an everyday guaranteed solution to the never ending problems of inflated national currency. DGC is NOT government issued legal tender.

Yes, on a global scale, there could be one financial category known as "digital gold currency" however that category could contain thousands of private brand name gold currencies. Here are some examples:

• GoldMoney gold grams
• e-dinar (digital gold dinar and silver dirham)
• Pecunix grams
• iGolder gold grams
• Webmoney WMG purse gold grams
• c-gold grams
• CryptoBullionReserve GoldGrams
• GoldNowBanc GoldGrams
• PC GoldGrams
• Gold-Pay grams
• Wontongold Grams

These are all currently functioning private Digital Gold Currencies.

Digital gold is unlike national currency. In the case of government issued paper money, one U.S. Dollar does NOT equal the value of one euro, yen, ruble or pound. National paper currency has floating exchange rates. However, one gram of digital gold always equals one gram of any other digital gold in any other country around the world. Gold is universally accepted by weight, no matter what brand name it holds. Gold backed digital units are the perfect candidate for a global digital currency.

One Gram = 1 gram = one gram

A digital gram of "Bob´s USA Gold" is identical to one gram of "Benson & Co.s" Singapore digital gold, which is also guaranteed to be exactly the same as a gram of "Amr´s XtraOrbit Egyptian" digital gold. Any private currency backed by gold can be easily exchanged for any other digital gold currency with no loss from exchange rates or additional fees which are always present with a paper currency exchange.

The concept of one global currency backed by gold should not mean ONE government issued digital currency. A global digital currency backed by gold should be understood to mean thousands of privately issued gold currencies or brands of currency. The public needs to recognize that digital gold currency is already in use today around the globe, it is NOT some devil which government henchmen dreamed up to control the masses. Digital gold is a private banking solution which offer extraordinary personal security and protection from inflation.

Digital gold = Freedom

Here is Mr. Bob Chapman's statement from "Staggering Deficits in a Depressionary Economy" (March 14th, 2009):

We are hearing more and more about digital gold as a private-bank solution to potential devaluation of fiat currencies. The May/June issue of the CFR´s, Foreign Affairs magazine, Benn Steil a senior fellow and director of International Economics, who has been on loan from the parent Royal Institute in London since 1996, says digital gold, "although a niche business at present, gold banking has grown dramatically in recent years in tandem with the dollar´s decline." Mr. Steil was the Illuminist who drew up the plans for the North American Union and the Amero. If there is digital gold out there somewhere we haven´t heard about it.

The new approach to a world currency obviously will be digital gold. This way they can introduce a one-world currency backed by gold to make it acceptable to the world public. The digital nature means government would know every aspect of your financial life and would control you and your country. The gold storage would, of course, be controlled by the Illuminists. The elitists have come to the conclusion another fiat currency is not going to be acceptable. This is why JP Morgan Chase, Citicorp and Goldman Sachs talk in terms of $2,000 gold and UBS projects $2,500. Historically such benchmarks are usually and normally exceeded by prices from $3,000 to $7,000.

When did Digital Gold become big government´s tool for spying?

Here a newsflash, the government already keeps a very close watch on the population through bank accounts and credit cards. Since 9/11 U.S. government agencies already, "...know every aspect of your financial life... and control you and your country" as Bob states. Digital gold won´t bring government agencies any further into your bedroom than they already are, that is an outright lie.

Bob also makes this statement in his article, "If there is digital gold out there somewhere we haven´t heard about it." Well, anyone reading can get on over to GoldMoney.com, Wmtransfer.com (WMG), Loom.cc or iGolder.com and try it out. Stop trying to demonize one of the best digital assets Americans have in the uphill battle to protect their wealth.

Digital gold is a protector of personal freedom and property rights. Private digital gold companies stand for freedom and financial privacy.

"To improve our money system it is neither necessary nor wise to destroy our present system. It is only necessary to produce a better product and to introduce it gradually."--Dr. Edward Popp, "The Great Cookie Jar", 1978

In all fairness I must disclose that I did email Mr. Bob Chapman and he responded saying that I just misunderstood him. After that response, I immediately re-read his article along with Ben Steil´s article(s) and a few others. I think I understand completely. Citizens in today´s world are moving away from the centralized greedy megabanks and towards local, smaller, decentralized level financial playing fields and that usually means gold or silver.

Every concerned citizen I´ve met is angry that their life saving and family nest egg just lost 40% of its value in the past two years. Everyone I meet seems mad that their job was shipped overseas in the past few years because manufacturing is not too expensive to do in the United States. Every person I know is angry at the Congressional big spenders for blowing through $3 Trillion dollars on bailouts and stimulus packages. I believe I understand it completely, it´s crystal. People want sound money.

The advances of today which give us digital gold instead of shiny gold coins for retail commerce should make NO difference in anyone´s ability to recognize honest money. The advantage of using digital gold as money is clear, gold cannot be created with a few keystrokes like excess bank loans. Digital gold gives citizens the ability to protect the population´s wealth just as freshly minted U.S. gold coins did back in 1792.

America was founded on gold and silver money. In previous decades all U.S. money was backed by gold or made of silver. It was good enough for Thomas Jefferson and it is good enough for today´s Americans.

There is nothing wrong with using digital gold currency as money and people like Mr. Chapman need to either rethink their position, clarify their writing and stop spreading rumors.

In the free Internet world, thousands of creative minds have already been building private currencies for more than a decade. Since gold is still considered money as it has been for thousands of years, the use of digital gold will continue to grow as a safe harbor protecting value from the approaching financial storm.

Digital gold currency is the number one monetary advocate for individual rights, privacy and freedom.

Georgia, Missouri, Washington State, Maryland, Montana, Colorado, Indiana & Previously New Hampshire

Today, there are about a half a dozen states with pending honest money legislation which includes the use of privately issued Digital Gold Currency for commerce and in the collection of taxes and fees. Here is one example from Indiana Honest Money:

Requires the treasurer of state and fiscal officers of political subdivisions to: (1) maintain one or more electronic gold currency accounts with a designated electronic gold currency payment provider; and (2) conduct all monetary transactions of the state or political subdivisions through electronic gold currency accounts. Provides that an electronic gold currency payment provider must use an electronic gold currency unit that constitutes a monetary unit of account and represents a claim of title to and ownership of a specifically defined, fixed weight of gold held by an independent specie vault. Specifies that a specie exchange with which an electronic gold currency payment provider associates must conduct the business of exchanging gold and silver coin, legal tender of the United States, and the electronic gold currency of the electronic gold currency payment provider.

I believe that in the very near future privately issued digital gold will be in much wider use throughout the US and around the world. However, there certainly will not be just one issuer and the gold currency could never originate from a government agency. There will be thousands of different private issuers and brand named Digital Gold Currencies in use protecting citizens wealth and privacy.

America was built on gold and as the United States sails past the $14 Trillion dollar debt level, I am very surprised to see any intelligent person trying to downplay the importance of sound money like Digital Gold Currency. Credit cards and fiat money are much bigger villains.[2]

1] "Staggering Deficits in a Depressionary Economy", Bob Chapman, March 14, 2009

2] "Credit Card Fraud Is Funding Terrorist Networks: Not Digital Gold Currency", Mark Herpel, American Chronicle, July 14, 2008

Mark Herpel is the editor of Digital Gold Currency Magazine and resides in Panama. This article was also published in DGC Magazine (April 2009).