EU Directive makes it easier to print e-money

R.A. Hettinga rah at
Fri Oct 23 09:24:44 EDT 2009


Original URL:
EU Directive makes it easier to print e-money
Out with the old

Posted in Financial News, 22nd October 2009 14:59 GMT

The E-Money Directive has failed to help establish a market for  
virtual currency and will be replaced with a set of less onerous  
regulations. The replacement E-Money Directive will come into force at  
the end of this month.

The European Council and European Parliament published the replacement  
Directive in the Official Journal of the European Union on 10th  
October. It will come into force 20 days after publication and must be  
transposed into national law by the EU's 27 member states by the end  
of April 2011.

The Council said that it hoped that the new Directive would address  
the failures of the old one.

"Its adoption follows an assessment by the Commission of [the old  
Directive] which shows that electronic money is still far from  
delivering the benefits that were expected when that directive was  
adopted eight years ago," said the Council when it announced the new  
law earlier this year. "The number of newcomers to the market has been  
relatively low, and in most member states e-money is not yet  
considered a credible alternative to cash."
Jacob Ghanty, an expert in finance law at Pinsent Masons, the law firm  
behind OUT-LAW.COM, said that the new version of the Directive lowers  
some of the barriers preventing companies from offering e-money  

"There was some criticism of the prudential regime of the Directive,  
which means the amount of money you have to hold to offer services,"  
he said. "People who looked at it realised that to be an issuer you  
were required to hold a lot of capital, which was quite onerous."

"That will now dropped from €1 million to €125,000, which is a big  
dip," said Ghanty.

He said that it will align the requirements relating to e-money to the  
requirements that payment institutions will have to meet under the  
Payment Services Directive, which comes into force on 1st November.  
"It will align it with the Payment Services Directive requirements,  
which is sensible because they are related concepts."

Ghanty said that the new E-money Directive also clears up some  
confusion about what e-money actually is. "There were criticisms that  
under the old Directive the definition of what e-money is was broad  
and vague, and that that made it difficult to determine what was and  
was not e-money," he said.

"The new one actually simplifies the definition which makes it clearer  
and also makes it more capable of coping with technology advances in  
the future," he said.

The old definition of e-money employed by the EU law actually excluded  
many kinds of services that service providers might have thought did  
count as e-money.

"Quite often a client would ask 'does it amount to e-money under the  
Directive' and we were able to conclude more often than not that it  
didn't amount to e-money, and this was not the intention of the  
Directive," said Ghanty. "I think the new definition will clearly  
capture the things the Directive was intended to catch."

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