EU Directive makes it easier to print e-money

[R.A. Hettinga]

<http://www.theregister.co.uk/2009/10/22/e_money/print.html>

Original URL: http://www.theregister.co.uk/2009/10/22/e_money/
EU Directive makes it easier to print e-money
Out with the old
By OUT-LAW.COM

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
services.

"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."