Russian version

Non-cash currency — deposited money (checking accounts)

Cashless currency arises either as a result of a credit emission, carried out by the central bank of the relevant state, or as the result of a transfer of cash currency in the form of banknotes or coins to a deposit account (a type of savings agreement) (fig. 20).

Deposited money as a form of credit money represents currency in paperless form. From an economic point of view, the existence and development are a result of the following:

1.     Reducing costs of circulation;

2.     Speeding up of circulation;

3.     Practicality and comparative security of cashless transactions;

4.     Simplicity of supervision of circulation for the State.

This form of money has the following important properties:

  • the side liable to the investor is not the central bank itself, but the private bank in which the funds are accommodated. In turn, the central bank is liable to the private bank. On one hand, storing government banknotes in a private bank, which bears responsibility to the investment only to the extent of its own capital, makes the money less secure in the case of the bankruptcy161of the bank. On the other hand, the storing of money in an unsuitable place, for example at home, poses a risk not only to the banknotes themselves, but also to the lives of the owner and his family;
  • this is not a bearer liability, but a nominal one, i.e. it has a property content which a person is not able to hold (detencio). In the legal language of the Ancient Romans it would be termed «the right of holding ». In addition, the Latin animus possidenti (the intention to treat something as one’s own) is fully preserved, giving the illusion of ownership (posessio);

Deposited money acquired the function of money only with the process of realization of cashless bank accounts i.e. only in the mid 20th century. This became possible only at the time of a corresponding level of development of industrial power, in part thanks to the release of banking mainframes by the company IBM and the introduction of CHIPS, an electronic system of inter-bank accounts.

L.G. Efimova writes: «In connection with this, economists for a long time did not acknowledge call deposits as being money. When, in 1930, John Maynard Keynes, in his book «Treatise on Money» included call deposit in his concept of money, G. Parker Willis, a famous professor of Colombia University, reacted to this entirely critically162. Amongst later economists, practically no opponents to this point of view remained163.

According to the French economist Pierre Berger, money is issued by three types of institutions: commercial banks, the state treasury and the issuer bank164. In this way, the opinion that the only bank able to issue its money is the Central Bank of the Russian Federation, appears to be erroneous165.166 Therefore it is not by chance that Article 29 of the Law on the Bank of Russia stipulates the exclusive right of the Bank of Russia only to emit cash currency.

The problem of the right to issue cashless (credit) money has not been unequivocally solved by the legislator. Insofar as a ban on cashless emissions exists, any commercial bank may issue (and does issue) its money in the form of balances in payment and current accounts. Nobel Prize laureate Friedrich Hayek spoke out in favour of the issue of private money167. He proposed that the monetary liability expressed by the currency issued by any concrete issuer would amount to the nominal value. However, different types of currency should be freely exchanged according to the rate of exchange. At the same time F. Hayek spoke out for the necessity for each issuer to support the value (buying power) of his currency in relation to the average set of wholesale products (a standard of price) by means of special, pre-determined measures of influence. «I expect that, at least in wealthy regions, far exceeding presentday national territories, people will be willing to regard an average set of wholesale products as a price standard, in relation to which they would prefer to safeguard the constancy of their money168. Despite scepticism from opponents, Hayek’s ideas clearly came to fruition in Russia, where promissory notes of the company «Gazprom» indeed fulfil the function of money, in both wholesale transactions and in the accumulations of financial institutions. The researcher himself suggested that the full realization of his idea requires corresponding political reforms, because governments are unlikely to relinquish the profitable privilege of issuing money169. However, his idea about private money was partly realized in the form of call deposits.

Some economists and lawyers suggest that such «private monies» do not have a cash/tangible form. Here we are forced to disagree and to point out that «self-addressed» bank bills, issued in exchange for deposits, which are so widespread now in Russia, are in fact «private monies». When such money is termed «private», their private-legal content is implied, in contrast to currency, which has public-legal content.

It is very important to note that their private-legal character applies only in the relationship between the investor and the private bank, whilst the legal relationship between the private bank and the State bank it remains one of a public-legal character.

Thus, deposited money (cashless currency), in the form of balances in the accounts of enterprises and organisations, is money of both the Central Bank of the Russian Federation and of the commercial banks. When a customer withdraws money from his account, then, in essence, one is talking about of the conversion of cashless currency (deposited money) to cash currency, to the banknotes and coinage of the Central Bank of the Russian Federation.

"Now we will investigate the legal character of non-cash money. For the purpose of this book, we understand cashless currency as balances in credit in various client accounts in banks, to which the application of Chapter 45 of the Civil Code of the Russian Federation extends. They are accounts which are specially intended for carrying out various transactions: payment, current, current currency, correspondence, accounts for the financing of capital investments etc.170 From a legal point of view, an entry into a bank account serves as a quantitative expression of the legal-liability claim of the client towards the bank. However, this circumstance does not impede the recognition of the bank liabilities as money, taking into account that the latter fulfils the function of a means of payment.

As a liability of the relevant storehouse (bank, depository), cashless money is subject to the law of obligations. An entry into a bank account attests to what sum (to what measure) the bank is the debtor of its client. In this way, the legal relationship we are examining appears to be relative and arises by the will of each party to the bank account contract. According to this contract, the obligation of the bank consists of the completion of concrete, positive actions. It should carry out the instructions of the client in making payments to a third party, in releasing cash funds to the client within the limits of the balance of his account and likewise it should accept payments owed to the client. The owner of the account’s right of demand can be violated above all by the bank, to which the client has the right to lay the same claim171

At the present time, the overwhelming majority of money in circulation in Russia is deposited, cashless money, which has almost no tangible expression (discounting the paper receipts on which bank statements are printed). In this way, contemporary deposited cashless money presents itself as a non-document nominal security:

  • for the bank: dividable State nominal «self-addressed» bills with a blank endorsement in the form of an electronic accounts entry;
  • for the client of the bank: dividable bank «self-addressed» bills with a blank endorsement in the form of an electronic accounts entry.

When considering the security of such a form of liabilities, we say that the liability of the Central Bank itself is secured, just as in the case of cash currency:

  • by the State’s obligation to accept it [cashless currency] as payment of taxes;
  • by the compulsory acceptance [of cashless currency] as payment for goods and services across the whole territory of the country.

The liability of the private bank should, in theory, be secured by the aforementioned liabilities of the Central Bank, but in the assets of any bank, non-cash currency occupies, in accordance with Basle Principles, no less than 12%, and as a rule, no more than 25%. As a result of the active credit policy of any bank, its liabilities are fundamentally secured by the quality of its credit portfolio.

Despite unity of form, the means of administration of money, on the part of the clients, varies from bank to bank, leading to a certain amount of confusion amongst economists.

There is no such thing as «electronic money», but there is an electronic method of gaining access to deposited funds; there is no «plastic money», but there is a method of gaining access to accounts with the help of plastic cards.

We will now introduce the basic methods of the administration of (access to) money:


Personal access or by post:

Access with the aid of electronic networks:

payment order;

retail e-banking systems: SWIFT, CHIPS, FedWire;


slips from plastic cards like VISA, systems like CyberCash, Cyberplat;


systems like CheckFree.



This form of money has no consumer value, since it does not exist in tangible form (perhaps it does possess a certain value of joyful emotion, arising when the rich man admires his bank balance, but this is hard to evaluate). The exchange value, as already indicated, depends only on the generally recognized, current reputation of the issuer, and also on the short and long-term expectations of fluctuations of the money in terms of a commodity basket (its buying power).

Since the development of a reliable long-distance communications and computing technology, the banking system was finally able to rid itself of the complex derivative legal relations. This form of money has practically no tangible form.

It is secured against the right to demand its acceptance in payment of taxes and for any payment between two legal parties, with the exception of a relationship known to be retail (not wholesale) commercial. This exception, of accepting cash currency as payment for goods, is conditionally licensed by the government in order to support a steady demand for non-cash currency.

Demand for currency

Besides generally known factors of demand for money, including those described by Keynes and Friedman, demand for cash and noncash currency not guaranteed by gold, forms as a result of the following factors, which, rather than being of economic character, are of a precisely juridical, public-legal nature.

1.     The necessity of paying taxes. Any upstanding government accepts only its own currency as payment of taxes. Correspondingly, the demand for currency depends on:

  •  The capabilities of said government to collect taxes;; 
  •  The ability of the economy of said government to produce taxable grounds, for example, taxable additional cost and taxable preservation of property;
  • Desire and capability of tax-payers to pay taxes.

However, it is sufficiently obvious that high rates of taxation lead to the flight of industry to other jurisdictions, and low rates of taxation lead to weakening of the government’s ability to defend its borders and to maintain order within the sovereign territory. Tax rate in the USA is the main publicly discussed issue and fluctuates, depending on the condition of the economy and the general public will, in the region of 20–30%.

2.     The necessity of transactions with the State for the purchase of State property. This is not an overly important factor, which actually works in the case of the privatisation by the government of wealthy enterprises.

3.     The necessity of having precisely State-supported means of paying any debt or making any payment within the territory of said State. This issue arises particularly sharply with the significant risk of disputes emerging when deals (transactions) are being made. If there is sufficient faith in the judicial resolution of a conflict, settlement of a debt with an improper means of payment can be a serious argument against the payer. But this factor directly depends on the strength of the government. In periods of discord and change of government, the aforementioned factor works against the currency or in favour of such privatelegal liabilities, like bills/promissory notes or bank liabilities or in favour of natural commodity money.

4.     The demand for currency for hoarding purposes, arising as a result of a lower level of faith in the government, compared to other issuers. This emerges usually in the case when confidence in one’s own government or in its ability to keep inflation in check, is essentially lower than confidence in other governments. An example of this is the Russians’ total lack of confidence in the Russian rouble as a means of stabilising prices, arising in part as a result of Pavlov’s reforms, which withdrew 50 and 100 rouble banknotes from circulation without compensation, and also as a result of many years of inflation and hyperinflation, which had regularly cheapened cash and non-cash currency. The author is personally acquainted with people who had invested 10,000 roubles in Sberbank in the 1980s, which at that time was enough to buy a «Volga» car or a decent house, and now is enough only to buy a children’s bike.

5.     The demand for currency for hoarding purposes, arising as a result of confidence in a government which capably supports a reliable and functional banking system. For example, the total collapse of the banking system in 1998 does not facilitate long-term storage of money, in the form of long-term rouble deposits.

A series of experts (the author included) believe that the fundamental causes of bank crises are not so much the sharp fluctuations in property prices (for building societies), in share prices (for investment banks), currency etc., as much as the incorrect fulfilment by the government of its regulatory function, which involves not allowing the warping of the credit portfolios of banks in one or another branch of the economy. For example, in the USA after the crisis of 1930–1933 banks were prohibited by legislation from acquiring shares.

6.     Convenient currency legislation. If the government prohibits the circulation of its own currency abroad, it is difficult for it to hope that foreign citizens and businesses will accumulate this currency.


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