With the review of the Second Electronic Money Directive, the European legislator aims to leap forward with the process of harmonisation of national electronic money laws of the Member States. This will depend to a greater or lesser extent on the enactment of a piece of legislation that promotes a new regulation of electronic money in order to enhance users’ confidence, mitigate technical weaknesses and stabilise its volatility to create competition and safety, bearing in mind the regulations concerning the prevention of money laundering and payment services.
Fifteen years after the adoption of the first regulation on electronic money at European Union level (Directive 2000/46/EC), the market experience has proven it necessary to undertake a major reform thereof aimed at both improving the practical effectiveness and aligning the existing regulation with the evolving market conditions. This firstly led to the adoption of Directive 2009/110 / EC of the European Parliament and of the Council of 16 December 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC. In Spain, the implementing law was Law 21/2011, of July 26, on electronic money and subsequent Royal Decree 778/2012, of May 4, on legal regime of electronic money institutions.
Directive 2009/110/EC was chiefly aimed at the development of the first E-money Directive with a view to adapting national laws to market reality at the time. The European legislator intends now -before the development of the third electronic money directive- to undertake a number of reforms of the legislation in force, which aim to harmonise and adapt said legislation through the development of the new Directive in accordance with, on the one hand, the provisions of the Payment Services Directive -because of the close relationship between them- and, on the other, with the essential differences existing between them. Hence, the new regulation should tackle the vague or blurred distinction between the two figures and sets of rules, which is a consequence of the convergence of technologies and business models.
The Directive regulates, among others, the issuance of electronic money and the relationships between the players involved. Without carrying out a thorough analysis on the regulations contained in the Directive or in the Spanish E-money laws; it is necessary to emphasise certain points which have become more relevant and controversial from a European Union law standpoint, regarding the meaning of certain legal concepts included in both the E-money Directive and the Payments Services Directive.
One of the greater discussions in this regard is that the transposition of the Second Electronic Money Directive has not been consistent in all Member States, which has led, for example, to different definitions of agents and distributors in the national laws of the various Member States. This is mainly due to the breadth of the possibilities of interpretation and the leeway granted to Member States as to the implementation of the Directive by Article 3.4 thereof, which enables e-money issuers to issue and redeem e-money through natural or legal persons.
This lack of delimitation by the Second Electronic Money Directive of the duties and powers of the natural and legal persons acting on behalf of the e-money issuer to distribute or redeem e-money has enabled the Member States to regulate the concept of agent and distributor in various ways. In fact, some Member States have not included a concept of distributor in their implementation laws. Moreover, most of those Member States that have actually included the concept of distributor have been largely influenced by the regulation of agents and distributors existing in the Payment Services Directive.This lack of homogeneity at European level may often also hinder the development of new means of payment related to the issuance of electronic money, creating “borders” at national level, which may hamper innovation within the sector since the Member States would actually be offering different levels of protection to consumers in the EU instead of promoting common approaches and procedures. The aforementioned seems to be also one of the triggering factors for the variation from one Member State to another in terms of the number of fully-fledged electronic money institutions.
Therefore, for these reasons, the European Union legislator now considers the possibility of adopting harmonisation measures at European level to ensure the elimination or minimisation to the maximum possible extent of all barriers between the payment and e-money services and institutions in the various countries from a regulatory standpoint. In this regard, it must be emphasised that, in order to provide greater transparency with regard to these entities, the European Union legislator shall have to further specify the obligations of notification and registration of electronic money institutions and of their agents or distributors depending on whether or not they are domiciled in that Member State (i.e. the possibility of providing services through branches or under the fundamental freedom to provide services through ‘passporting’).
Other measures to be considered by the European Union legislator are those proposed to the European Central Bank by Member States and that are geared towards a reduction of the risks involved in the use of electronic money. An example of this would be the lack of transparency of information on decentralised electronic money institutions (number, structure, scope, etc.), given that, since it is not clear who should provide information to the user, it generates confusion and insecurity among them when it comes to assessing electronic money, even bringing about losses or other disadvantages.
Further, it should not be forgotten that electronic money institutions are based on digital media and therefore it is important to keep in mind the risks that may arise from technical failures, cyber-attacks, money laundering, terrorist financing, data theft or loss of account credentials. To this end it has been proposed that an authority requests a security document on the digital infrastructure of the company, its protocols and other technology components.
These are just some of the many measures that are currently on the table and which are expected to be useful to achieve electronic money that offers integrity, transparency, efficiency and good performance in financial markets, by promoting a level playing field and assisting in the development of coordination of international supervision.