A Cryptographer Says He Holds the Key to a Digital Currency

The dream of a digital currency, a form of money invented just for electronic transactions and just as anonymous as cash in the physical world, is at least as old as the original concept of the Mondex smart card 10 years ago. Next came Cybercash, Digicash, Beenz, Flooz, and others. Only Mondex hangs on. But the dream lives on, and at least one experienced entrepreneur with cryptographic expertise thinks he has the answer. “There will be a new currency redesigned for the Internet era,” says Gideon Samid, co-founder and chief executive of ClearBIT Systems, Rockville, Md., and he argues ClearBIT is that currency. The idea is that users will load a prepayment into a storage device, a CD ROM, say, or a USB stick, and then will be able to send digital cash via e-mail to any party they wish, using a personal identification number. The “currency” will arrive in the e-mail as an encrypted sequence of bits that the recipient decodes using a private key and then redeems through ClearBIT. The company will hold the prepaid accounts at a bank, which will handle settlement, and will make money by charging recipients of the payments. The fee, says Samid, will probably be in the neighborhood of 50 cents on a $50 transaction. Similarly, users will be able to pay online merchants, though in this case ClearBIT will aggregate transactions to the same merchant and then pay with a credit card number. Eventually, Samid hopes, the merchants will want to receive payment directly from ClearBIT to lower their transaction costs. Samid is negotiating with an unnamed financial institution in Texas to be the bank of record, and hopes to wrap up those talks by the end of the month. The holdup, he says, stems from worries the bank has that the method's anonymity might run afoul of officials in Washington, D.C. Meanwhile, he has also made arrangements with a major chain of convenience stores to sell ClearBIT CDs. The time is right for this technology, argues Samid, who once worked for Israeli security and is also the head of ClearBIT's parent company, Tel Aviv-based AGS Encryptions Ltd. “There's market pressure now,” he says, as the idea of doing electronic transactions anonymously gives people “a sense of welfare in this fishbowl environment we live in. It's a sense of freedom.”