Federal Reserve Chairman Alan Greenspan said Thursday that the public, not regulators, will decide whether electronic money makes it in the United States.

"Consumers and merchants, not the government, will ultimately determine what new products are successful in the marketplace," Mr. Greenspan said. "Government action can retard progress but almost certainly cannot ensure it."

In remarks prepared for the Treasury Department's electronic money and banking conference, Mr. Greenspan said the government's creation of the automated clearing house system proves that consumers are king. The government originally thought consumers would pay their bills through clearing houses, he said. Instead, they stuck with cash and checks.

"Efforts by the government to choose and support a single technology - the ACH in this case - may have slowed efforts by the private sector to develop alternative technologies," he said.

Mr. Greenspan also urged the emerging electronic money industry to police itself. Too many scandals could prompt regulation, he warned.

"We could envisage proposals in the near future for issuers of electronic payment obligations - such as stored-value cards or digital cash - to set up specialized issuing corporations with strong balance sheets and public credit ratings," he said. "Such structures have been common in other areas, for example, in the derivatives and commercial paper markets."

The government and the marketplace, Mr. Greenspan added, may have a hard time determining the economic benefits of electronic money. The problem stems from seigniorage, which is the float between the time a consumer buys a smart card and that when a merchant demands payment on an item purchased with the card.

"It may be difficult for us to determine whether profitable and popular new products are actually efficient alternatives to official paper currency or simply a diversion of seigniorage from the government to the private sector," the Fed chairman said.

Mr. Greenspan again urged regulators to hold off on imposing rules on electronic money.

"To develop new forms of payment, the private sector needs the flexibility to experiment without broad interference by the government," he said.

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