Electronic money institutions (EMIs) are financial institutions that offer electronic money services to customers. Legislation on electronic money transfers is partially harmonized in the EU as there is only an Electronic Money Directive (Directive 2009/110/EC) (“EMD”) rather than a regulation. In Malta, the EMD is introduced in the Financial Institutions Act, Chapter 376 of the Laws of Malta.
Article 2 of the ECHR defines electronic money as “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued upon receipt of funds for the purpose of making payment transactions as defined in point 5 of Article 4 of Directive 2007/64/EC, and which is accepted by another physical or legal entity other than the issuer of electronic money.“1
In other words, electronic money is a digital representation of value that is issued upon receipt of funds for the purpose of carrying out payment transactions. Electronic money transactions can be quickly completed through a smartphone, tablet or computer, without the need for physical cash or checks. This makes electronic money the default choice for online purchases and international money transfers.
EMIs are the institutions that issue the electronic money and offer services related to the issuance, distribution and redemption of electronic money. EMIs have passporting rights within the EU and they initially emerged as a popular alternative to brick-and-mortar banking solutions, especially among consumers who prefer to use digital channels for financial transactions.
However, an EMI is not the only type of financial institution in the financial sector that can be licensed to issue electronic money. In reality, banks also offer options that involve issuing electronic money. Unlike banks, EMIs are not authorized to offer loans or accounts that pay interest; therefore, their name defines the singular licensed activity that they offer. Despite the limited range of services offered by EMIs, the licensing process for an EMI remains extensive and requires a minimum capital requirement of €350,000.
While EMIs can issue electronic money, the EMD does not give them the power to issue electronic money against new types of currencies that do not already exist. But the approval of MiCA by the EU Parliament on 20th April 2023 stipulates that EMIs and credit institutions can create electronic money based on new e-money tokens issued under the MiCA regulation. Although MiCA also regulates issuers, EMIs will be exempted from requiring a new license to issue new e-money tokens as long as the formalities prescribed therein are followed.
Preamble 19 to the MiCA Regulation states that: “Strict conditions should be laid down for the issuance of e-money tokens, including an obligation for e-money tokens to be issued either by a credit institution … or by an electronic money institution authorized in accordance with Directive 2009/110/EC. For the same reason, issuers of e-money tokens should ensure that holders of such tokens can exercise their right to redeem their tokens at any time and at face value against the currency to which these tokens refer..”2
Title IV of MiCA applies to e-money tokens and chapter 1 of this title defines the requirements to be met by all issuers of e-money tokens. Specifically, Article 48 MiCA provides the requirements for offers to the public or access to trade in e-money tokens. Article 48 provides that:
“1. A person must not make an offer to the public or apply for admission to trading of an e-money token, within the Union, unless the person in question is the issuer of such an e-money token and:
(a) is authorized as a credit institution or as an electronic money institution; and
(b) has notified a white paper to the competent authority and has made public [it]…in accordance with Article 51 [of the MiCA Regulation].”3
Furthermore, Article 48 of the MiCA Regulation provides that “e-money tokens shall be deemed to be electronic money” and section 44 of Article 3 of the MiCA define electronic money as having the same meaning “as defined in Article 2, No. 2, of Directive 2009/110/EC [i.e., EMD].“
Malta’s EMI laws have not been amended to reflect changes brought about by MiCA. That said, as such, no changes are required to the Financial Institutions Act (Chapter 376 of the Laws of Malta) in relation to EMIs because the EMD was not amended and the MiCA is directly applicable. Accordingly, Maltese EMIs are increasingly homogenised with EMIs licensed by other EU Member States because the scope of EMIs relating to e-money tokens issued under MiCA has been harmonized across the EU.
