Colin Crook plucks a $5 bill from his pocket and props it against a computer screen. On the screen is a picture of a brown leather wallet holding cash - of the digital variety.

"We as a society have gotten used to this as being real money," says Mr. Crook, pointing to the greenback.

"What I would like to be able to achieve is the equivalent confidence in this," he says of the electronic alternative. "To have people believe that this is not some facsimile, not some sort of rough equivalent, but the identical thing."

Under the watchful eyes of Mr. Crook, the banking company's chief technology officer, Citicorp has invested four years of research and development to bring digital money to reality. Having hired a cadre of top- flight mathematicians and computer scientists, the company's Citibank subsidiary is sponsoring what it calls the Electronic Monetary System, or EMS, which is designed to enable banks, companies, and individuals to exchange cash in electronic form.

Citibank aspires for no less than a dominant role for its product in the realm of electronic commerce. It already has two patents on the system, and more than 10 are pending.

While several competing companies have obtained patents for digital cash systems, Citibank executives contend their EMS has all the features necessary for widespread acceptance, plus one that no one else can claim - the bank's name and credibility.

"We think we have the best security, we think we have the best functionality," said Sholom Rosen, the project leader and a vice president for emerging technology at Citibank.

The system's core function is to store cash in digital form on computer software and hardware.

Because the system does not rely on any network mechanism for security, Mr. Rosen said, the digital cash can be neither counterfeited nor stolen. It is designed to be completely transferable among individuals, financial institutions, or companies, like physical cash. And the transactions leave a complete audit trail for traceability.

For instance, EMS could enable a retail customer to transfer money from his bank account to his hard drive and use the digital cash in myriad ways: to pay bills, buy airline tickets, give money to a family member, or shop on the Internet.

Ultimately, the bank's goal is to set forth the technology standard that other financial institutions will adopt and that consumers will accept.

"It's not our intent to wipe anybody out," Mr. Rosen said. "We're building a technology that you can partner with other institutions on. It's not just for Citibank customers only."

But don't expect to see a product in the marketplace anytime soon. With bankerly caution, Citibank is taking a long view.

Officials say they plan to observe the trials and errors of existing systems, which have, in their view, been rushed to market. They will also confer with legal, regulatory, and security experts as they continue to hone EMS technology.

Mr. Crook dismissed most of the competing digital cash and Internet payment schemes as "toys" and "experiments." He predicted that as the market shakes out and technology marches forward over the next five to 10 years, Citibank's system will prove a winner.

Mr. Crook characterized EMS as "a serious attempt to try and build a comprehensive way of handling electronic money that reflects the interests of the regulatory authorities, the banking system as it is built today, and the way technology is going to rapidly change."

Dozens of scholarly papers have been presented on electronic cash schemes, and several banks are experimenting with components like electronic checks and smart cards. But the only digital cash product available to consumers is Ecash, an offering of the Amsterdam-based technology company Digicash, which is being tested through Mark Twain Bancshares in St. Louis.

Ecash is said to be even more cash-like than EMS or other "auditable" programs. Lose Ecash, and it's like having dropped coins through a sidewalk grating, never to be retrieved. The countervailing advantage is something close to absolute privacy.

For Citicorp, which would make possible the recovery of an audit trail through electronic notes, it is more a question of risk management. And if risks are to be taken, who better to understand and mitigate them than banking professionals?

Pure technology companies, Mr. Rosen said, "are willing to proffer the technologies but not take the liabilities."

Mr. Rosen said one digital cash venture recently sent him an offer to test $10 of its product free. But along with brochures boasting of the system's security, he said, was a contract releasing the company of any responsibility for the money it was issuing.

"Banks have to be sophisticated enough to understand what the risks are," Mr. Rosen said. "One of the issues is, in the system in general, we're not there yet."

Emphasizing the bank's role as a repository of public trust, Mr. Crook said that Citibank must be extremely conservative about putting its weight and reputation behind an electronic cash scheme.

"We've profoundly thought it through," Mr. Crook said. "We haven't just tried to get some system out on the market that is clearly ill-conceived and is not going to work.

"I'm hoping that the regulators will say, 'Thank God somebody sat down and thought this through from the beginning.' "

The strategy is a familiar one for Citibank. What Citibank did for the automated teller machine - pushing out the most technologically advanced models, albeit somewhat later than other banks - it now hopes to do for digital cash.

Given that Citicorp chairman John Reed has a technology background, observers say they are not surprised that the bank is channeling resources to a futuristic and somewhat speculative electronic cash system.

The project, said Bernell Wright, a former Citibank executive who now works as a consultant, reflects the bank's corporate culture and philosophy.

"What you're seeing, whether it ever sees the light of day or is commercially acceptable, is a unique Citibank preoccupation about the marketing summation of a technology equation," Mr. Wright said.

The issues Citibank is raising, Mr. Wright said, concern "whether it is more noble to spend an inordinate amount of time and money to design an answer that really is a risk management solution, rather than take the facile, very low-order, very compromisable solution that most financial institutions are now settling for."

People familiar with Citibank's system have signed nondisclosure agreements and thus refuse to talk about it. Among the witnesses are members of the Financial Services Technology Consortium, a multibank research group initially organized by Citicorp - under nondisclosure conditions.

Several analysts who follow Citicorp said they were unaware of the system (before a recent report on it in American Banker), and several consultants interviewed for this article said the only on-line cash system they knew of was Digicash's Ecash.

If other U.S. banks are working on similar systems, they have not made details public. Mondex, the smart card invention of National Westminster Bank, London, has demonstrated an on-line version of its electronic cash.

"I do know of a few very smart individuals working at banks who have done a lot of thinking and who, in some cases, have patents on digital cash applications," said Kawika Daguio, a federal representative and electronic commerce expert at the American Bankers Association in Washington.

Mr. Daguio added, "I wouldn't be surprised if their banks were seriously considering developing those kinds of applications into products."

No matter how attractive the electronic cash systems that may come to the fore, Mr. Crook predicts public acceptance will be extremely gradual. Any system will have to be both widespread in use and airtight in security for companies and individuals to entrust anything other than disposable income to it, he said.

The winning system will have to be so thoroughly trustworthy, Mr. Crook said, pointing to that computer screen, that "the guy down begging in the street picks this up and says, 'This is really 20 bucks.'"

"Money is different, emotionally, than a lot of other things, and it's very difficult for you and I to start to transact $10,000, to sit at a computer and send it off into cyberspace," Mr. Crook said.

"This is a real act of faith and an act of trust."

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