A4-0417/97

Resolution on electronic money and economic and monetary union

The European Parliament,

- having regard to Rule 148 of its Rules of Procedure,

- having regard to the report of the Bank for International Settlements of November 1996 on electronic money and monetary policy,

- having regard to the conclusions of the Dublin European Council of December 1996 on the transition to the Single Currency,

- having regard to the conclusions of the Brussels G7 Council of February 1995 on the information society,

- having regard to the series of recent announcements by various Member States on the possible introduction of smart identity cards,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinions of the Committee on Research, Technological Development and Energy and the Committee on the Environment, Public Health and Consumer Protection (A4-0417/97),

A. whereas the development of electronic money constitutes not just a transformation in payment systems but a re-definition of money itself, thereby raising the question of who should be responsible for its issue: the issuing of money can be left completely free, be restricted to specified institutions subject to regulation by central banks, or continue to be restricted to central banks exclusively,

B. whereas the development of electronic money moreover raises the question of whether and to what extent it should be made subject to monitoring by the competent authorities,

C. whereas the replacement of cash by electronic purse cards is likely, over the next decade, to be a more significant development than electronic money on the Internet since it does not entail such a large change in the habits of consumers and suppliers,

D. whereas the widespread use of electronic purse cards could ease significantly the difficulties for Europe's citizens of the introduction of the Euro, both by replacing cash transactions and by providing the facility to calculate the old national currency equivalent of sums in the new single currency,

E. whereas the rapid introduction of electronic purse cards, provided this takes place in a standardized format, could significantly ease the difficulties for European business in making the necessary information technology investments for the introduction of the Euro,

F. whereas the growth of electronic money and the concomitant probable increase in velocity of circulation will require central banks to adopt new arrangements to monitor its issuance and management in order to operate monetary policy effectively,

G. whereas the development of electronic money and its widespread public acceptance is likely to occur over a period of many years, and is therefore unlikely to pose any immediate threat to central banks' cash assets and seigneurage, and their ability to conduct monetary policy,

H. whereas the growth of electronic money may render the responsibility, whether of central banks or of other competent authorities, of supervising financial markets substantially more difficult, if these bodies are unable to carry out effective monitoring where this is necessary,

I. whereas the European Central Bank would probably not wish to administer and operate electronic money,

J. whereas a central bank regulatory regime for electronic money should not have the effect of restricting the operation of such systems to banks alone, not least because this might slow the process of rationalization underway in European retail financial services provision that is essential for the overall competitive position of our economy,

K. whereas the pace of growth in the use of electronic money in the European economy is a crucial element in determining the pace at which we become a genuine information society, an objective which is obviously vital for Europe's future global competitive position,

L. whereas integrating the move to the single currency with the development of the information society will give a powerful impetus to the supply side revolution in the European economy and the flexible, creative culture in European society, which are the very essence of the vision driving the EMU programme,

M. whereas the present proliferation of different forms of electronic money generally, and of electronic purses in particular, is likely to raise entry costs to the electronic market-place and would thus create the danger of Europe's move to the information society becoming, at the very least, biased against SMEs and quite possibly gridlocked by anti-competitive, incompatible software and hardware systems,

N. whereas by the same token, a standard format for electronic money and for smart card electronic purses, by lowering the entry costs to the electronic market-place, would disproportionately benefit SMEs and might therefore dramatically accelerate the pace at which Europe becomes an information society,

O. whereas smart card technology offers the possibility of adding onto an electronic purse card a multiplicity of functions, both financial, such as those of credit, service provider and store cards, or general, such as those of identity and social services claimants' cards or driving licences, thereby removing the need for citizens to carry around an increasing number of different single-function cards,

P. whereas a standard format for smart electronic purses would therefore also diminish the parallel dangers of anti-competitive market cartelization and potential technological gridlock in the non-monetary use of smart cards by encouraging the development of multi-function cards, which would further accelerate the advent of the information society,

Q. whereas in particular the development of sound electronic money and secure electronic proof of identity are the two essential foundations of the electronic market-place which is central to the information society,

R. whereas the development of electronic money, within a proper regulatory framework, especially if combined with smart identity cards, could reduce fraud, tax evasion, money laundering and other crime and whereas therefore the case for allowing it to offer the same anonymity as currently enjoyed by cash should be considered most critically,

S. whereas, however, restricting the anonymity of transactions using electronic money and the development of the electronic market-place generally obviously raises issues of civil liberties which must be fully debated with a view to introducing a comprehensive regulatory framework, preferably at Union level,

T. whereas the absence of a proper regulatory framework for electronic money would substantially exacerbate the inadequacies already apparent in the supervision of both public and private sector data bases across Europe, and could in itself therefore constitute a threat to civil liberties,

U. whereas there may be in the longer term potential sources of revenue from the multiple usage of the card, for example by renting additional processing capacity on the card's smart chip to private sector service providers, such as credit card operators, retailers offering customer loyalty cards, telecommunications companies etc, or to the public sector for such functions as a driving licence, social security or identity card,

V. whereas it is important to ensure a multiplicity of issuers within a regulatory framework which provides for public confidence, interoperability and the stability of the financial system, in order to allow for greater competition and innovation,

W. whereas the issuers of such cards should be regulated principally by the competent supervisory authorities in order to ensure effective control; whereas in this context considerations of competition and consumer protection must also be taken into account,

X. whereas appropriate issuers or operators would therefore be those financial institutions which comply with the requirements set out in an EU-wide regulatory framework;

I. RECOMMENDS THAT:

1. The future European Central Bank should, together with the competent authorities, be involved in the oversight of the electronic market-place in Europe;

2. The Commission should therefore put forward a proposal for the establishment of a regulatory framework for the issuance of electronic money, which allows all institutions which meet the requirements of public confidence, interoperability and stability of the financial system, to issue electronic money under a single European passport and the supervision of the competent authorities;

3. The Commission should give consideration to how electronic purses could be adapted to calculate the old national currency equivalents of sums in Euros;

4. Issuers should be required to furnish the European Central Bank with such data from the system that the bank deems necessary for the management of monetary policy;

5. Issuers should be required to furnish such data to the competent authorities as they deem necessary for the supervision of the integrity of the financial system generally;

6. Issuers should be required to furnish such data to other relevant authorities as would be deemed by European or national laws to be necessary to achieve other objectives of public policy, such as the fight against crime;

7. The European Monetary Institute should comment on this resolution and set out its own analysis of the relevance of electronic money to the realization of EMU, in a formal presentation to the Subcommittee on Monetary Affairs of the European Parliament at its earliest convenience;

8. The Commission should likewise comment on this resolution;

9. Those Member State governments which have plans to apply smart card technology to identity cards and/or to the streamlining and modernisation of the administration and provision of public services should submit comments on this resolution at their earliest convenience to the Subcommittee on Monetary Affairs of the European Parliament;

10. Any private sector interests which at present, or over the next five years, are planning to be significant users of smart card technology, should likewise submit their comments on this resolution;

11. The Council should institute its own study of the integration of moves towards EMU and the information society;

12. The Commission should submit to the Council and the European Parliament proposals for a regulatory framework for the issuance of the Euro smart card, and the management of smart card systems, at its earliest convenience;

13. The Commission, on the basis of the 5th EU framework research and development programme, and out of concern to protect more specifically the right to privacy and to ensure the safety of transactions, should promote research activities in the field of encryption software compatible with the worldwide use of electronic money under conditions of legal regularity and security;

14. The Council, possibly in consultation with the Council of Europe, should institute a study of the security, data protection and civil liberties implications of the electronic marketplace;

II. Instructs its President to forward this resolution to the Commission, the Council and the European Monetary Institute.