The UK Treasury has issued a consultation on amendments to the European e-Money Directive (EMD). This is with a view to producing a revised UK regime governing the issue and regulation of electronic money or "e-Money".
E-Money is described in the original EMD as a "monetary value" stored on an electronic device such as a chip card or a computer memory, that is accepted by undertakings other than the issuer and generally intended to make payments of a limited amount. Arguably, because of the restrictive definition (that excludes electronic payment services like Paypal) and the regulatory burdens on smaller issuers in particular, very few businesses have volunteered to become regulated as e-Money issuers by the Financial Services Authority, despite the legislation being in effect since 2001.
To try and reinvigorate the electronic money market, the European Commission has issued proposals to amend the directive and also align the e-Money regime with the new Payment Services Directive (PSD), which will relate to authorisation and regulation of (non-bank) payment institutions.
Among the issues being looked at in the consultation are:
- Scope and definition of e-Money which is being clarified and made more "technologically neutral".
- Prudential requirements – a proposed reduction in the initial capital requirements for e-Money issuers to €125,000 from the original €1million and new methods of calculation based on nature and risk profile of e-Money issuers.
- Seeking clarification on the application of redeemability requirements and consumer rights.
The Government is stated to support the Commission's view that the existing regulatory burden on e-Money issuers imposed by EMD has been excessive and that the provisions of EMD should be modernised and made consistent with the PSD.
The consultation is due to close by 14 April 2009.