WASHINGTON - A House subcommittee has begun delving into new forms of electronic money for the first time, but the message it is getting from the private sector has a familiar antiregulatory ring.
At a hearing Tuesday, the first of a series on "The Future of Money" scheduled by House Banking Committee member Michael Castle, the architects of several technologically advanced transaction systems argued against the need for immediate legislative action.
Typical was Scott Cook, chairman of the financial software maker Intuit Inc., who said, "This field is so nascent that regulation would likely stunt useful developments. This is not fertile ground for new regulation."
"Other countries have encouraged products to take shape without interference," and the U.S. risks losing its competitive edge if it "adds to the regulatory burden of depository institutions," warned Rosalind Fisher, executive vice president of Visa U.S.A.
Taking mild exception was David Van Lear, chairman of Electronic Payment Services Inc., a leading developer of smart card technology. Though he wants to discourage "undue regulation," he suggested that government will have to take an active role if electronic money is to gain the same level of public confidence as older forms.
Rep. Castle, the Delaware Republican who heads the monetary policy subcommittee that sponsored Tuesday's hearing, comforted the free marketeers on his industry panel. They also included Heidi Goff, senior vice president of MasterCard International, and William Melton, chief executive officer of Cybercash Inc., which sells a transaction security tool for the Internet.
"You've picked the right Congress," Rep. Castle said. "This is the most antiregulatory Congress in years."
But he added that with rapid advances in computing and payments technology, Congress must educate itself about the risks of fraud and abuse, and about the emerging systems' implications for monetary control, tax policy, security, and privacy.
He said he plans to hold another session in September to hear government officials' policy concerns.
Innovations in money - ranging from on-line Internet payments to computerized banking to smart cards with cash value stored in their chips - "contain the potential both for great commercial promise and for enormous risk of undermining the system of exchange and the administration of justice," Rep. Castle said in opening remarks to an overflow crowd in the Banking Committee hearing room.
"I'm certainly not strong on the idea of regulation, but we don't want a runaway system," he added at the end of a nearly three-hour hearing that included demonstrations for the Congress members of Visa's stored-value card system and Mr. Cook's recently introduced software, Quicken Financial Planner.
The Intuit founder wanted to illustrate how personal computers can change people's lives. He went so far as to predict that people will be better at managing money, will have fewer bad debts, save more, and thereby boost the economy.
"Keep in mind that electronic commerce has many suppliers and many channels," Mr. Cook said. In contrast to broadcast media or the telephone industry, "electronic commerce will be like magazines or radio stations, where there are dozens or hundreds of competing entrants."
Noting that Intuit has begun tying the fortunes of its Quicken software closely to banking industry partners, Mr. Cook put in a plug for the "many excellent rules that are in place to protect consumers and ensure a strong financial services industry."
He acknowledged there may be some need for regulatory fine-tuning - hence congressional intervention - because "many of those rules were written before a PC was a glimmer in the imagination. Some of them might need to be updated to reflect the advent of the PC and what PC-owning customers want."
Similarly, Mr. Melton called for continued reliance on the policy principles that have allowed the U.S. banking and credit card systems to thrive.
"Monetary systems are ultimately founded on trust (that) exists now in the three-dimensional world because of a strong global banking system backed by stable national governments," he said.
"As we move into the world of credit card use on the Internet, we urge that the competitive pressures which have driven the evolution of the industry to date be trusted," the Cybercash CEO added. He urged the congressional panel "to embrace our faith in the ability of competitive marketplace pressures to continue to bring consumers safer, more convenient, and lower-cost payment options."
"We recognize the need to work closely with regulators and legislators to create a healthy and accessible payments system," said Ms. Goff of MasterCard. But under questioning later she said, "it is premature for new legislation or regulation."
Somewhat against the grain, cryptology expert and privacy advocate David Chaum said: "With electronic cash, just as with paper cash, it will be the responsibility of government to protect against systemic risk. This is a serious role that cannot be left to the micro-economic interests of commercial organizations."
Mr. Chaum is chairman of Digicash Inc., a Netherlands-based company that offers highly secure smart card and Internet payment systems with anonymity similar to that of cash.
