Electronic Money and Electronic Money Institutions

A position paper on regulation, definitions and the market

On November 15, 2002, 1.1a2, Association for e-money issuers in the Netherlands, published its position paper on Electronic Money and Electronic Money Institutions. The paper discusses the concept of electronic money, its market potential and the current regulatory issues. 1.1a2, chose to publish this paper at this specific moment in time as substantial differences appear to exist in the way the EMI directive is understood and implemented by regulators/supervisors in the various member states of the European Union. On this page you can read the summary or download the Word document (131 kB).


1. On October 27, 2000, the EMI directive on the taking up, pursuit and prudential supervision of the business of electronic money institutions was promulgated. This directive, to be implemented by April 27, 2002 at the latest, allows organisations other than credit institutions to issue electronic money. Such organisations, referred to as electronic money institutions, need to be properly supervised, but they can operate in all the European countries under a single license. Considering the wider context of the rapidly evolving electronic commerce business, the directive explicitly states the importance of a regulatory framework that avoids hampering technological innovation and that harmonises the prudential supervision of electronic money.

2. In October 2002, 1.1a2, the Association for E-money Institutions in the Netherlands, conducted an investigation into the implementation status of the EMI directive. The results show that:
- five of the fifteen member states have not yet implemented the directive,
- two substantially diverging supervisory approaches are applied.

3. We conclude that, at present, there is insufficient harmonisation of the prudential supervision framework for electronic money. More specifically, the concept of a technology-neutral approach has not yet been fully adopted and harmonised. As a result:
- a particular e-money system may qualify as e-money in one member state, while in another member state it will be considered a remote banking system,
- even within member states, functionally similar e-money systems may qualify differently on the basis of their distinct technical features.

4. Since September 2000, market players have based their investments on the expectation that as of 2003 a harmonised legal framework for e-money institutions in Europe would be in place (regardless of the technical choices made). These market players now face the problem that their future market position and market potential may be unduly limited by the approach taken by their local supervisor. The chance exists that in some countries local supervisors may start compliance activities based on an ill-understood concept of e-money, the market of e-money institutions or the technology applied.

5. The members of 1.1a2 wish to prevent a situation from arising where some supervisors in Europe require market players to execute changes in organisation, product or technology, that in retrospect and in comparison with other member states turn out to be unduly restrictive. We note that the implementation of the EMI directive is already facing delay due to the late implementation in five member states. As the establishment of a consistent European level playing field for e-money issuers is already taking more time than expected, we recommend that the competent supervisors in the European member states not rush forward with local approaches to the supervision of electronic money institutions, but that they agree on a harmonised prudential supervision regime for electronic money.

6. In summary, 1.1a2 urges European competent supervisors:
1- to postpone local compliance activities in the domain of electronic money and electronic money institutions until their supervisory approaches have been harmonised and are in accordance with the principle of technological neutrality,
2- to consider the functional approach of the Financial Services Authority as the basis for the harmonised approach to supervision of electronic money institutions,
3- to recognise the relevance of recent and future product developments in the mobile telecom industry to the electronic money debate.

If you wish to react to this paper or would like more information on 1.1a2, we welcome your response by e-mail.

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