Defending regulators' deliberately light hand on electronic commerce, Deputy Treasury Secretary Lawrence H. Summers pointed to hilariously mistaken predictions about today's common technologies.

The inventors of the computer thought worldwide demand would be 10 machines, Mr. Summers noted recently. The originators of the photocopier envisioned libraries as their principal customers, assuming offices would never give up carbon paper.

The White House and financial regulators are taking these lessons to heart in crafting policies on electronic money and high-tech banking services. It's too early to know which electronic technologies will succeed or how they will spread, officials argue.

"To date, the market has not yet spoken," Mr. Summers said. "Policymakers have not wanted to introduce preemptive regulations."

As Comptroller of the Currency Eugene A. Ludwig put it: "You run the risk of killing the golden goose before it lays any eggs."

But questions persist about this hands-off approach, such as the susceptibility of consumers to Internet scams or invasions of their privacy.

"Who's the golden egg being laid for?" asked Walter A. Effross, an electronic commerce expert at American University's law school. "I do not see that the consumer is getting much if any of that gold."

Indeed, one of the strongest pushes for government intervention is coming from consumer privacy advocates.

A survey of 1,009 computer users released this month by the think tank Privacy and American Business found 58% wanted the government to regulate how Internet businesses collect and use customer information.

Regulators and bankers alike agree that the greatest risk of the government's go-slow attitude is the political reaction that would follow a major score by a hacker or a massive consumer rip-off. If a disaster occurs, regulators would probably be hauled up to Capitol Hill for embarrassing hearings.

Katharine F. Needham, senior director of the Banking Industry Technology Secretariat, described bankers' biggest fear: "There is going to be a big scandal, Congress is going to get in there, and we will have all this awful regulation."

Regulators contend they are willing to take that chance because the electronic money and banking markets are simply too small today to pose a broad threat to the financial system. Most trials of stored-value cards in the United States are confined to closed populations such as college or corporate campuses.

"These risks are significantly smaller," said Patrick K. Barron, first vice president of the Federal Reserve Bank of Atlanta. "You are talking about individual risks."

He compared the risk to the public with that consumers took in the early days of videocassette recorders, when some chose the VHS format-the ultimate winner-and others chose Betamax. "You took a risk if you bought one of those early machines that used the beta format."

Misplaced government interference could squelch the country's opportunity to be the world leader in electronic commerce, government officials agree.

"All the benefits of this innovation could be lost," Mr. Ludwig said. "You may be shooting at the wrong target and be no safer at all."

Yet even advocates of light government regulation are beginning to temper their comments.

"OCC is acutely aware of the effects of supervisory actions-and our inaction-can have on market developments," said James D. Kamihachi, senior deputy controller for economics and policy analysis.

Poorly timed regulations can slow innovation, but so can uncertainty over government actions, Mr. Kamihachi said.

"The risks of inaction are that the problem gets away from you-that you have misjudged it," Mr. Kamihachi said. "But that has to be balanced against acting but doing the wrong thing."

He added, "We will take action where we think it is warranted."

Regulators insist that they aren't sitting on their hands.

The Federal Deposit Insurance Corp. in January became the first regulator to issue examiner guidelines for electronic banking and began using them in state nonmember banks in May.

FDIC examiners' depth of review depends on whether the institutions are using electronic systems such as Web pages for advertising or to conduct financial transactions. FDIC wants to know whether bank management has controls to protect the security of computer systems and the privacy of financial and customer information.

The Office of the Comptroller of the Currency and the Fed are developing similar guidelines for national and state member banks, respectively.

The Comptroller's Office plans to issue guidelines on Internet and phone banking before the end of the year. They will emphasize the security of on- line transactions and involvement of senior management in deciding which new electronic banking products to launch.

Like guidelines it issued in September on stored-value cards policy, the Office of the Comptroller of the Currency will not specify which security methods institutions should use.

The Office of Thrift Supervision, which granted a charter to the first Internet institution in 1995, became the first regulator in late March to solicit comment on a broad array of electronic banking issues. For example, OTS asked whether automatic loan dispensing machines should be exempted from branching rules and how might Community Reinvestment Act standards apply to institutions that span the country electronically.

An interagency Consumer Electronic Payments Task Force headed by Mr. Ludwig held the first of two scheduled public hearings on June 9. The second is slated for July 17.

And in May, the Treasury Department's Financial Crimes Enforcement Network included the issuers of stored-value cards in its money laundering proposal.

The proposed rule would require only that stored-value card issuers register under the Bank Secrecy Act. Stored-value cards handle relatively few and small transactions now and do not seem to be popular with money launderers yet, but officials said they are preparing for the future.

"We do not know enough yet to accurately pitch the ball, but you have to know you are in the ballpark," said Stephen Kroll, Fincen's chief legal counsel.

Regulators contend these measures provide sufficient oversight without stifling entrepreneurship.

But American University's Mr. Effross and others suggest that regulation can promote business when it sets ground rules.

"It may be in commercial interests to have consumers knowing that these new financial products are regulated," Mr. Effross said.

For example, credit and automated teller cards thrived under the consumer protections of regulations E and Z, said New Jersey attorney Richard L. Field, chair of the American Bar Association's electronic commerce payment committee.

"In those cases I think regulation stimulated, possibly to the surprise of all parties," Mr. Field said.

Another problem the federal government could help solve is conflicting state digital signature laws, Mr. Field said. Setting a federal standard could dispel a major impediment to electronic commerce, he said.

Government rules requiring disclosures about liability, such as who pays in the event of the loss or theft a stored-value card, and use of customers' private information also could boost public acceptance, Mr. Field and Mr. Effross said.

Those who second-guess the government's strategy fear the consequences of government inaction.

"It worries me that we are going to wait and not regulate until something happens," Mr. Effross said. "The technology will always be changing."

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