The Rights of Account Holders
Elgar Financial Law series
Chapter 5: Introduction to Part II
Money is a human creation. It originated in the form of metals and coins and now exists and circulates in the form of banknotes and bank deposits. Like the systems for transferring securities examined in Part I, the systems for transferring money have undergone a significant transformation. Contemporary money transfer systems no longer rely on physical delivery of cash but now rely on electronic entries to deposit accounts maintained by intermediaries. The holding system for money is intermediated and largely electronic. Promises to deliver securities, transfer money or offset commodity contracts may be analyzed in the context of the front-end and back-end environments. Similar to Part I of this book on securities account relationships, this Part also does not deal with front-end transactions that result in money transfers, such as the sale of goods. The functioning of modern commercial societies requires that monetary value be transferred expeditiously, efficiently and at a reasonably low cost. All contemporary payment devices such as funds transfers, letters of credit, negotiable instruments and credit cards share an important feature: a device used (e.g., payment order, check, debit card, etc.) only represents an obligation or promise to pay and is not the money itself. When someone accepts a negotiable instrument or agrees to be paid by a letter of credit he does not acquire any money in the legal sense. The law deems only coins and banknotes authorized by the government as money. However, it is monetary obligations and promises that are at the core of contemporary payments systems.
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