Friday, April 07, 2006

Regulatory Challenges to E-Gold

e-gold Ltd. was registered in Nevis, West Indies in 1999, but was removed from the register in 2003. As such it appears to be an unregistered entity.

In September 2004 several Australian e-gold currency exchanges ceased operation due to stricter application of Financial Services Licencing regulations. Digital gold currency exchangers that were closed down by the Australian Securities and Investments Commission (ASIC) include:

* goldex.net
* sydneygoldsales.com
* ozzigold.com

Whilst exchange providers can still operate in Australia many have found it impractical to do so due to proxy issues. It is unclear if unified banking regulations between Australia and New Zealand will result in e-gold exchangers being banned from NZ. Australian residents can though exchange e-gold via exchangers in the U.S., Europe or other countries.

Bullion Storage at E-Gold
As of November 2005, it is unclear if e-gold has an independent auditor of the physical bars, so there is no way of knowing if e-gold Ltd. really has the reserves to back the currency in the e-gold system. e-gold does maintain an "Examiner", a web page with updated statistics on outstanding liabilities and the total amount of each precious metal in its holding. While proponents generally consider this assuring enough, critics remain skeptical.

Limited Use
Beginning January 2006, eBay has restricted buyers and sellers from using any online payment system, except for PayPal. eBay specifically named e-gold as one of the online payment systems that will result in them cancelling a seller's account if used. e-gold runs a non-reversible transaction policy, meaning that there is no protection for purchasers if vendors fail to supply goods.

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