The advancement of technology has led to the creation of a new kind of currency — electronic money. It may be in the form of digital value saved on a technological device like a chip card or a computer.
The phrase quasi-money refers to highly liquid assets that are quickly convertible into cash because they are in great demand and issued by highly creditworthy companies. Gold certificates, bonds, and certificates of deposit are examples of quasi-currencies.
EMI — Electronic Money Institution (or Issuer) may issue e-money and quasi-money and conduct e-money payments.
A firm must pass a regulatory examination to become one. Six months may pass during clearance.
EMI licenses offer services
EMI-licensed businesses have all the rights of ordinary banks. This facilitates online and offline payments. This is not at all the same as just opening business bank account.
A company may create an electronic wallet for its customers by creating subaccounts. Customers may trade cash for electronic coins and banknotes and save them in an e-wallet. EMI licenses are sometimes called e-wallet licenses.
Electronic money lets customers transact with merchants. It allows virtual cash purchases. Depending on the exchange rate, some e-money may be exchanged for fiat cash later.
Requirements and application
The difference between PI and allowed capital needs is initial permitted capital. It’s €350,000, far more than for banks. During the authorization process, the business must keep these funds in the same country that obtained its EMI banking license.
Each EU member has different licensing requirements. In Latvia, a firm with yearly sales under 2 million euros must register. The license isn’t needed. The Czech Republic may issue 5 million euros in e-money. Before applying for a license, check the local legislation.
Upper management faces EMI restrictions. In most EU countries, regulators investigate all corporate management’s backgrounds (directors). EU rules need two EU-based directors. In certain countries, one inhabitant may be the EU and the other CIS.
Director qualifications must be documented. Financial or economic education, not technical.
For PI and EMI licenses, in addition to the universally acknowledged and necessary PSD2, each state may add its own requirements for a corporation to get them:
- availability of relevant software,
- efficient risk control procedures,
- secure customer identification procedures,
- strong technological base,
- segregated client fund account,
- accounting and external audit obligations,
- shareholding requirements,
- regulation of operational risks, etc.
PI and EMI have similar license and application file contents. The “small EMI-license” is a shorter e-money license. This is an exception with limited allowed activities. Not all EU countries use it.
To apply to become a small EMI in the UK, for instance, you must supply the following information:
- your business strategy;
- payment services you may provide (if appropriate);
- your governance structures and internal processes;
- proof that when you begin operating, your EMI will create a monthly average outstanding e-money balance of less than €5 million;
- proof showing, in the twelve months before the application, the average monthly volume of payment service transactions did not exceed €3 million (this might be based on predictions for newly-formed businesses);
- a statement of how you will protect e-money holders’ monies;
- proof that you fulfill the minimum beginning capital requirements.
The list includes all corporate directors, managers, and agents for investigation.
Typically, a decision on your application is made within:
- 3 months of reception for regular cases;
- 12 months of receipt for incomplete applications.
Your business is exempt from registration or permission if it is:
- credit institution;
- bank or municipal bank;
- building society;
- credit union.
Many fintech businesses choose Lithuania over the UK because of Brexit. Since last year, when the Bank of Lithuania – the country’s regulator – created a remote license application system, it has attracted financial organizations. This one-click solution helps worldwide entrepreneurs reach Lithuania. Several Chinese companies are applying online in Lithuania for SEPA-wide banking licenses to avoid international limitations.