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d by investing in a currency's reputation, with the government acting to enhance confidence in the money's continued value and reliability; or, alternatively, use might be compelled by legal-tender restrictions, public-receivability provisions, or various measures of financial repression, up to and including the now less fashionable options of exchange or capital controls.
The contest, moreover, is universal. As deterritorialization accelerates, no central bank can fully escape the oligopolistic struggle, no matter how competitive or uncompetitive its particular brand of money may be. Rivalry is not limited merely to the most popular global currencies, as is sometimes suggested (De Boissieu 1988). That would be so only if cross-border competition were restricted to international use alone: the dollar, euro, and yen along with a few lesser rivals (e.g., sterling and the Swiss franc) vying for shares of private investment portfolios or for use in trade invoicing. Deterritorialization, however, extends to foreign-domestic use as well, hence involving all currencies, to some degree, in direct competition with one another -- the weak as well as the strong, even those formally protected by exchange controls as well as those that are legally convertible. Money's oligopoly is truly global. The challenge of deterritorialization is faced by every government.
But that of course does not mean that the challenge is the same for every government. Quite the contrary, in fact. Universal does not mean uniform. In reality, the problems facing the favored few countries whose currencies actually do the competing across national borders - most notably, the reserve centers of the U.S., Euroland, and Japan - are in a class apart from the difficulties confronted by those many other states whose monetary spaces are being invaded. The challenge is clearly greater for economies like those in Latin America, the Middle East, or the former Soviet bloc, where currency substitution is by now a familiar and accepted fact of life. The implications of electronic money can thus be expected to be comparably differentiated. I will consider first the latter group of countries -- those with less competitive currencies - and then move on to the reserve centers.
Implications for the less competitive
What does electronic money add to the problems facing countries with less competitive currencies? E-money's main impact here, while not insignificant, will be more a change of degree than of kind. The effect will be to expand the population of currencies circulating within each country, further eroding an already increasingly tenuous connection between nominal demand and supply of national money. As more substitute currencies become available, variations of home-currency monetary aggregates will have even less influence on overall spending. Policy will become even more attenuated.
The key point is that for central banks in these countries, the challenge to monetary autonomy is difficult enough already even without electronic money. As compared with the halcyon era of territorial currency, when central banks could assume a reasonably tight connection between their own decisions and spending behavior, deterritorialization poses a tricky dilemma: how to guide overall expenditures when some part of the money supply available to residents is comprised of currencies other than the state's own monetary unit. The authorities can still use such instruments