Because of the use of the hash function, a digital signature allows the receiver of a message to determine whether the message has been altered since it was digitally signed. State legislation in this area tends to address either electronic signatures (23 states) or digital signatures (16 states), but not both. States with legislation on electronic signatures differ on the question of what qualifies as an electronic signature. Several states have taken the UCC Article 1 approach and recognize any form of electronic mark intended to serve as an electronic signature. Other states, however, require that several conditions be met before an electronic signature will be legally enforceable. Generally, for these states, in order for an electronic signature to be effective it must: (1) be unique to the person using it; (2) be capable of verification; (3) be under the sole control of the person using it; (4) be linked to the data in such a manner that if the data is changed the signature is invalidated; and (5) conform to regulations adopted by the Secretary of State. Digital signature statutes typically provide for the promulgation of regulations governing the implementation and use of a digital signature infrastructure. The digital signature infrastructure contemplated by these statutes involves a trusted third party, usually a certification authority or CA, whose job is to confirm that the private key used by a sender to sign an electronic message is in fact the private key of the purported sender.
The White House Framework suggests that Government action may be necessary to ensure the safety and soundness of electronic payments systems, to protect consumers or to respond to important law-enforcement objectives. Of course, the White House would work closely with the private sector to inform policy development and ensure that governmental activities flexibly accommodate the needs of the emerging market-place. From a central bank perspective, one of the most fundamental questions raised by electronic payments is its impact on monetary policy, especially if its development is as widespread as some have predicted. In the near term, it appears that Internet payments systems will not significantly impact monetary policy. For the most part, the Internet and other communication networks are currently being used to facilitate existing banking transactions using traditional banking settlement channels. Most payments over the Internet simply result in the movement of funds from a bank account in one institution to one in the same or another bank. This should have few, if any, implications on the conduct of United States monetary policy or the measurement of the United States money supply. “Money” as defined by M1, M2, or M3, would still be held in accounts at banks and would be reported to the Federal Reserve through existing reporting mechanisms. If, however, Internet payments evolve to the point where digital “coins” or other private electronic money begin to be widely used and circulated like Federal Reserve bank notes, the potential implications for monetary policy could be much greater.