electronic payment methods that we generically call digital currency or e - money. e - money can be defined broadly as monetary value stored electronically, on a phone or a card, or in the cloud. it ’ s a digital alternative to cash, and it ’ s a stored value that is not linked to a bank account. there are two types of e - money that i want to talk about today. the first type is denominated in a national currency, and it represents a claim on the issuer. in canada, there are a number of examples. there are paypal balances, and there are stored - value cards that use the visa or mastercard networks. 2 these types of e - money store value and can be used to buy a lot of things. the safety of this type of money really depends on the credibility of a trusted third party. this is because you ’ re trusting visa or paypal to safeguard your balance and to validate and authenticate your transactions. the second type of e - money is cryptocurrency – such as bitcoin. this type of e - money is not denominated in any national currency and so has its own unit of account. it is also completely decentralized and does not represent a claim on the issuer. this is the there was a gradual phase out of commercially - issued bank notes that lasted over a decade. rich discussions of this period are available in powell ( 2005 ) and bordo and redish ( 1986 ). gift cards and store - specific cards are not considered e - money because they are not accepted by businesses other than those that issued them. bis central bankers ’ speeches revolutionary part of cryptocurrencies – transactions can be validated without a trusted third party. the way they achieve this is by using cryptography to ensure that each transaction is valid and secure. trusted third parties are needed for other functions, however. you may want help to keep track of your virtual wallet and these currencies are not redeemable for national currencies. people generally trade them through an online exchange at the market rate. bitcoin was introduced in 2009. five years later, there are more than 500 other cryptocurrencies – ripple and litecoin and i could go on. 3 even though only a few of them ever really do any trading, they continue to develop and innovate. e - money still a wallflower in canada e - money is still a

as well as cowrie shells, cocoa beans, gold and, eventually, bank notes and coins. none of these objects, except for the gold and cocoa beans, has any meaningful inherent value. they are money because people accept them as money. for this to happen, money must do three things. first, money must serve as a medium of exchange : you pay tuition ; you receive an education in exchange. the alternative is bartering, but that is complicated and inefficient. second, money must serve as a store of value. when you work during the summer you need to be confident that every dollar you earn is still going to be worth a dollar when it comes time to pay your tuition. finally, money must serve as a unit of account, which you need in order to compare prices – like comparing the value of the new blackberry with other mobile devices on the market. the form of money we know best is bank notes. they were issued primarily by commercial banks in canada and the united states before those countries created central banks in the early 20th century. these privately - issued bank notes ultimately failed to provide what the economy needed and so central banks were given this responsibility. the bank of canada has been issuing bank notes since 1935. 1 the cash you have in your wallets perfectly meets the three criteria of money. it is accepted almost everywhere, there ’ s very little counterfeiting, and the issuer – the central bank – won ’ t go bankrupt. we also target inflation, which means that the internal value of money is predictable. since we started issuing bank notes, there has been a parade of non - cash options introduced to our payments system. they ’ ve been driven by technology and consumer demand for efficient ways to pay for things. in the 1970s, credit cards were leading edge – around the same time that pink floyd and led zeppelin dominated the music scene. in the 1990s, debit cards were the new big hit. the next leap in innovation was e - transfers and online banking services. payments are even quicker now with contactless credit and debit cards. last month, apple pay became the latest player in this game. so we ’ ve come a long way since cocoa beans. yet all these payment innovations can be used only if you have a bank account. the vast majority of canadians have access to banking services, but that ’ s not the case in many developing countries. that ’ s part of the reason why non - banks are coming up with innovative