EU Directive makes it easier to print e-money

Ian G iang at systemics.com
Fri Oct 23 07:28:44 PDT 2009


The eMoney directive (1994) was originally written at the desire of the 
banks to clobber Digicash and the like.  The Bundesbank led the charge 
by more or less writing it so that "emoney is reserved for banks (or 
approximations)."  There was stiff opposition from Britain, Netherlands 
and one other (Denmark?), and the compromise that Bundesbank agreed to 
was that an institution could be "not a bank" in name but the barriers 
were preserved.  IOW, an elephant, with huge inputs in capital, huge 
outputs in pollution and no value to the ecosystem.

This was all justified on "monetary policy" which I showed to be just 
marketing blather in an old paper here:
http://iang.org/papers/monpol.html
In which I more or less predicted it would fail and issuance would be 
done in USA.

Then, in late 1990s, the reality was reaching even the EU in that the 
original concept was a failure so the committee proceeded to rewrite it. 
  That's all it needs, right?  Of course, they had no actual experience 
in eMoney, they were a bunch of bureaucrats learning by watching what 
was happening in the press.  Still with the banks behind them, and the 
impending euro to make them nervous, they essentially enjoyed a 
market-learning process in a committee, and predictably came out with 
the camel of 2000.

This camel of course failed, and as the Paypal, webmoney and e-gold 
models showed themselves, they slowly came to the realisation that their 
camel had to be downsized.  Now they have a shetland pony.  It's nice 
and tight, definately cute, and probably doesn't eat more than is 
needed.  There is probably a niche for them in the shetlands.

It's actually almost doable, on paper, but would you want to take that 
risk?  Why would you want to?  The total equation is still impractical, 
and you are better off issuing eMoney (both inside and outside their 
definition) somewhere else.



iang


On 23/10/2009 15:24, R.A. Hettinga wrote:
> <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."





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