The Swedish government has proposed that EC Directive (2000/46/EC) on issuing electronic money (e-money) be implemented into national legislation. This will facilitate and simplify the use of e-money, which is not yet widely used in Sweden. E-money includes cards that are not associated with an account and that can be used at sellers other than the issuer, online and in traditional shops.

An e-money institution's activities will include those of both traditional credit institutions and banking businesses: e-money is considered a financial transaction (comparable to credit cards) as well as an instrument of payment (comparable to paper money). The e-money issuer consequently offers not only a method for financial transaction, but also actual money, similar to an issuer of paper money and coins.

According to the regulation, e-money institutions must have sound and prudent management, sound administrative and accounting procedures, and adequate internal control mechanisms. These should correspond to the financial and non-financial risks to which the institution is exposed, including technical and procedural risks, as well as risks connected to its cooperation with any undertaking performing operational or other ancillary functions related to its business activities.

An e-money institution will require a licence from the Swedish Financial Supervisory Authority. The authority will regulate the institution's activities and management.

E-money institutions must have an initial capital of at least €1 million.

Demands for capital investments are high and an e-money institution must always have sufficient funds to cover its debts. Exceptions may be made for smaller institutions, which must report annually to the Swedish Financial Supervisory Authority on its business activity.

A bearer will be able to redeem e-money at par value in cash (banknotes as well as coins) at a cost no higher than that of the actual transaction.

The regulation is proposed to come into effect in Sweden on April 27 2002.

For further information on this topic please contact Agne Lindberg at Advokatfirman Delphi & Co by telephone (+46 8 677 54 00) or by fax (+46 8 20 18 84) or by email ([email protected]).