Academic literature on the topic 'Electronic Money Directive (EMD)'

The article analyses the legal basis of the European Union (EU) influence on the virtual assets market. It was found that the current EU legislation on the virtual assets is still full of legal gaps and does not ensure proper market regulation because of the early stage of its development. The absence of a unanimous position regarding the virtual assets market regulation forces the EU Member States to apply their own, sometimes contradictory, approaches to market regulation. It disaffirms the basic principles of the European Singe Market functioning, in particular the free movement of goods and services. It was found that according to the current EU legislation, virtual assets may be qualified as payment tokens, investment tokens and utility tokens. Payment tokens may be considered as electronic money or funds. They are covered by the Directive (EU) 2009/110 and the Directive (EU) 2015/2366. For the purposes of anti-money laundering, virtual assets may also be classified as virtual currencies under the Directive (EU) 2018/843. Investment tokens may be qualified as transferable securities or other financial instruments and will therefore fall within the scope of the Directive (EU) 2014/65. Utility tokens are not covered by EU legislation for now. Instead of merely addressing issues and challenges of virtual assets, the European Commission took a broader approach to the future development of the virtual assets market in the EU, and adopted on 24.09.2020 a new Digital Finance Package. At the core of the mentioned Digital Finance Package are the legislative proposals for an EU regulatory framework on virtual assets. This includes the proposal for a Regulation on Markets in Crypto-assets (MiCA) which is designed to provide a comprehensive bespoke regulatory framework for virtual assets in the EU. It was substantiated that MiCA is an ambitious EU legislative project that responds to an urgent policy need. However, further substantial revision of its detailed provisions will be necessary to provide a comprehensive regulatory framework of the EU influence on the virtual assets market.

The Goods and Services Tax Network (GSTN) manages the Common GST Electronic Portal. The payment of money, inclusive of the Goods and Services Taxes (GSTs), is made to the Reserve Bank of India (RBI) in three different ways – It can first be deposited as revenue in compliance with law; it can also be deposited after collection, following notices of demand; and finally it can be deposited after recovery from defaulters, into the respective Consolidated Funds, which are mutually independent parts of central and state treasuries. GST revenues accounted for in the Consolidated Funds would have to be correct, complete and uncontested. The GSTN thereafter manages the digital facilitation of the registration, furnishing returns, computation and settlement of Integrated Goods and Services Tax (IGST), electronic way bill and other functions if prescribed in accordance with law. This paper examines if the functioning of the GSTN within the framework of the Constitution, would enable the State to apply the Directive Principles of State Policy, which guide governance in India, to secure and preserve a just social order.

Purpose This paper aims to compare the prepaid card laws/regulations in Nigeria, the UK, the USA and India with the aim of determining the best approach to regulating prepaid cards, that is the approach that promotes financial inclusion and also makes the product less attractive for money laundering. Design/methodology/approach This paper relies mainly on primary and secondary data drawn from the public domain. It also relies on documentary research. Findings This paper makes the following findings and recommendations: Nigeria has the best approach to regulating providers of prepaid cards. Nigeria’s approach could foster financial inclusion and at the same time mitigate the money laundering risks associated with prepaid cards. Nigeria’s approach is not too strict like the Indian approach and it is not too relaxed like the UK and the USA approach. Operators, including mobile/telecommunications operators, wishing to operate money transfer schemes in Nigeria are allowed to do so with approval from the Central Bank of Nigeria and in strict conjunction with licensed deposit-taking banks or financial institutions. The UK, the USA and India are recommended to adopt Nigeria’s approach. The UK and the USA have the best approach to regulating agents of prepaid cards. Both countries require prepaid card providers to maintain a current list of agents and make it available to the relevant authorities upon request. The approach allows regulatory agencies to effectively monitor and supervise prepaid card agents. India and Nigeria are advised to clarify their approach regarding the regulation of prepaid card agents. The prepaid card laws/regulations of those countries should be modified to specify if the agent of a prepaid card provider is required to be licensed or registered by a competent authority or if the prepaid card provider (the principal) is required to maintain an updated list of agents which must be made accessible to a designated competent authority, when requested. The new changes will afford regulatory authorities the opportunity to effectively monitor and supervise prepaid card agents. India’s approach to thresholds would preclude most individuals in the intended target market from accessing basic financial products, as most people typically do not have residential addresses that could be confirmed by reference to formal documentation. India should adopt the “risk-based approach” and not the “wholesale de-risking approach”. Research limitations/implications Given their low-risk characteristics, closed-loop cards, specifically cards which do not allow reloads or withdrawals, remain outside the scope of this paper. Originality/value Although there have been researchers who adopted the comparative approach like Jean J Luyat and Will Cain, the comparative approach adopted by those researchers was not detailed enough and also was not aimed at seeking to answer the research question in Section 1 of this paper. Both writers focused on only the aspect of financial inclusion making the whole research a one-sided approach. Jean J Luyat focused on “how regulation had an impact on the development of prepaid cards in Japan and Europe”. He was able to discover that prepaid cards were growing rapidly in Japan but not gaining acceptance as a payment method in the European Union (EU) and France. He aligned such growth in Japan to different factors including regulation. He stated that Japan had a simple and flexible regulatory framework compared to the EU and France which have a complex regulatory system with strict prudential requirements. Nothing was said about the money laundering aspect of such regulation and neither was anything said about thresholds and other optional recommendations canvased by the Financial Action Task Force. The Electronic Money Directive referred to by Jean J Luyat has already been repealed and a second Electronic Money Directive is in place. A comparative approach is adopted in this research seeking to compare the approach in Nigeria with that of the UK, the USA and India. Each of these countries adopted different approaches. The results are to help answer the research question in Section 1 of this paper. The countries were selected on the basis of how strict their regulatory regime is. India’s regulatory regime is the strictest while the UK and the USA are the most lenient. Nigeria is caught in between strict/lenient.

The paper is devoted to the study of the problems of the banking sector development as a digital ecosystem in Ukraine, since with the transition to “open banking”, which is now taking place in most countries of the world, the banking paradigm has changed and there is a need for its transformation based on the introduction of digital technologies. The banking sector of Ukraine is also undergoing transformation processes associated with the creation of banking ecosystems. The provisions of the PSD2 Directive do not apply to Ukraine, but in July 2019, the NBU announced the need to reform the national payment legislation, in accordance with the requirements that were reflected in the Directive, and it began to gradually introduce some of its provisions into Ukrainian legislation. In Ukraine, in comparison with other countries, the fintech market is developing at a very slow pace, which is explained, among other things, by the policy of the NBU, which does not respond quickly enough to the emergence of new fintech products/services, changes in market conditions; it conducts strict regulation of the activities of fintech startups. Moreover, the legislative acts that are in force in Ukraine make it difficult to bring innovative products/services to the market. The Fintech Ecosystem Model of Ukraine 2025, which was developed by the NBU, is based on four key elements: regulation and policy, capital, demand, and talent. These elements within the ecosystem are in a constant process of interaction and they provide support for innovation from inception to the regulation of innovative products, services, and their capitalization. On November 12, 2020, the Verkhovna Rada was presented with a draft of the Law on Payment Services (No. 4364), in the drafting of which the requirements and norms of European regulatory acts were taken into account: the Second Payment Directive (PSD2) and the E-Money Directive (EMD). With the adoption of this law, it will be possible to resolve a number of issues related to the development of banking ecosystems in Ukraine.

Purpose The aim of this paper is to assess the relevance of cryptocurrencies with regard to the money laundering risk on the market and to present widespread money laundering techniques and recognizable patterns of abuse. In addition, this paper aims to find an answer to the question to what extent the measures of the fifth EU Anti-Money Laundering Directive (AMLD) as well as other appropriate preventive measures are sufficient to reduce the money laundering risk in the area of virtual currencies (VC). Design/methodology/approach Firstly, the analysis requires a consideration of the theoretical foundations of money laundering methods, as well as a presentation of the technical foundations of cryptocurrencies and their ecosystem. Secondly, it is discussed to what extent VC are suitable for money laundering, which characteristics enable them to launder money and which new money laundering techniques result from this. In addition, a comparison of different money laundering risk classification is done in relation to VC from the perspective of different actors in the financial market. Findings Owing to their simple electronic storage and transferability, crypto assets pose a concrete risk of money laundering. Their inclusion in the fifth AMLD was therefore a necessary step by the European legislator. However, the question arises to whether the directive and the further preventive measures presented in this paper sufficiently fulfil the objective of reducing the money laundering risk in relation to VC. One positive aspect is the inclusion of the crypto custody business as a financial service in the German Banking Act. According to the definition in Section 1 (1a) sentence 2 no. 6, the offering of wallets is subject to authorization and the offering party becomes an obligated party within the meaning of the Germany Money Laundering Act. From a supervisory point of view, the new licensing requirement is very much welcomed, as the custody of private cryptographic keys entails considerable risks. However, non-custodian wallet providers who do not store the private keys of their users, are not covered. A closer analysis of the amending directive to the fourth EU AMLD reveals that other relevant players in the crypto market, such as mixer and tumbler services, are also not covered. Originality/value It is quite clear that cryptocurrencies and the blockchain technology will continue to accompany one in the coming years. Further credit institutions arising in the market exposed to the described risks will be seen. The paper will therefore present and evaluate possible risk reduction/options for anti-money laundering for new and existing financial institutions.

This paper is included in the First Monday Special Issue #3: Internet banking, e-money, and Internet gift economies, published in December 2005. Special Issue editor Mark A. Fox asked authors to submit additional comments regarding their articles. E-money four years later In the late 1990s, there was a lively debate about the implications of the newly emerging e-money on the ability of central banks to control monetary aggregates.[1] What caught the imagination of many observers was not so much the fact that new types of money were electronic. Rather, it was the potential that new forms of money were capable to be transferred via the internet without the intervention of a traditional credit institution. More than anything else, the trial of DigiCash in 1994 with its ‘Cyberbucks’ rang the alarm bells of monetary authorities. It had everything they feared: it was issued by a non-bank, it could be used via the internet, it was P2P capable and it was anonymous. Against this background, a debate ensued about the merits of the new type of money and its potential to limit the power of central banks. Central banks and international bodies such as the Bank for International Settlements published a large number of reports [2] and academics scrutinised the issues involved. Finally, law makers took to the issue and e-money became subject of regulation in a number of countries. Thus, after long debates, the E-Money Directive of the European Union was passed in 2001 (it is currently reviewed). By 2001, however, many of the early pioneers such as DigiCash, Cybercash or First Virtual had gone out of business. The whole discussion began losing steam. Moreover, the very concept of ‘e-money’ was slowly changing. Initially, e-money was meant to be a close electronic substitute for cash: a bearer instrument, capable to circulate, anonymous, etc. To some degree, this was achieved by e-purses. However, only to a degree because e-purses do not allow balances to circulate. The recipient has to return balances to financial institutions and the corresponding value will be credited to a bank account. Thus, from the point of view of the payor, e-purses have a lot in common with cash, but not from the point of view of the payee. On the internet, nothing like the envisioned digital bearer certificates has emerged. Rather, today, what is called ‘e-money’ consists of limited purpose accounts with non-banks. In the EU these non-banks have to obtain an e-money licence. In the U.S. they may be required to hold state money transmitter licences. These accounts have much more in common with bank accounts than with cash. What drives the demand for these products is convenience of use. Thus, in the end, the internet e-money that exists is not a new type of money at all. And the card based e-money is struggling in many parts of the world. Only recently, one of the first e-purse schemes, the Danish Danmont has been discontinued. What are the lessons? 1. I think the approach by Alan Greenspan to take a ‘wait and see’ attitude was vindicated. Strict ex ante regulation of new concepts and products make life difficult for small start-ups and thus slows down innovation. Moreover, early regulation may be misguided because it is not known well what to regulate. Thus, the type of e-money regulators had in mind in the late 1990s (digital bearer instruments) never took off. 2. Payments exhibit strong network effects. Therefore, any new instrument that is meant to be more than just a niche product has be firmly connected with the payment backbone: the bank-based retail and wholesale payment system. Therefore, the emergence of a parallel circulation of alternative monies should not worry central bankers. Such schemes are unlikely to grow beyond the already existing scale (in form of barter schemes etc.). Technological innovations are unlikely to change this. This is the point made in my paper and I think it is still valid. 3. The early discussion was very much about technical issues. Innovators that entered the market were technology companies. However, the payment industry also is, to a considerable extent, a service industry. The early newcomers ignored this and paid the price. They all vanished from the market. Today’s successful internet payment providers are much more focussed on service than their predecessors. 4. It seems wise to let non-banks have a share of the payment market. Internet payments, for example, require a mix of technological skills and quality of service that banks may often be unable to provide. Notes to Special Issue Update 1. Strictly speaking, the term e-money was a misnomer. It implied that traditional monies were non-electronic. But as a matter of fact, bank deposits had been electronic for many years already. 2. Between 1996 and 2001 the BIS published 5 reports on e-money. The ECB (and its predecessor the EMI) published 2 reports (1994 and 1998) and a security framework for e-money issuers (2002). The European Commission passed an E-Money Directive that came into force in 2002. In some countries law makers were much faster. Thus, the German government amended the German banking law in 1997 requiring e-money issuers to become banks. Technically, it is conceivable that banks (or even non-banks) that are based in offshore centres can issue e-money and distribute it via the Internet all over the world. Therefore, many economists see offshore e-money issuers as a severe threat to the ability of central banks to conduct monetary policy. In this paper, it is argued that offshore issuers will denominate their e-money products in terms of existing currencies. Therefore they will be affected by monetary policy measures in the same way as onshore banks.

The thesis deals with the emergence of bank and non-bank entities that provide a range of unique transaction-based payment services broadly called Mobile Financial Services (MFS) to unbanked, underserved and underbanked persons via mobile phones. Models of MFS from Mobile Network Operators (MNOs), banks, combinations of MNOs and banks, and independent Mobile Financial Services Providers are covered. Provision by non-banks of ‘bank-type’ services via mobile phones has been termed ‘transformational banking’ versus the ‘additive banking’ services from banks. All involve the concept of ‘branchless banking’ whereby ‘cash-in/cash out’ services are provided through ‘agents.’ Funds for MFS payments may available through a Stored Value Product (SVP), particularly through a Stored Value Account SVP variant offered by MNOs where value is stored as a redeemable fiat- or mobile ‘airtime’-based Store of Value. The competitive, legal, technical and regulatory nature of non-bank versus bank MFS models is discussed, in particular the impact of banking, payments, money laundering, telecommunications, e-commerce and consumer protection laws. Whether funding mechanisms for SVPs may amount to deposit-taking such that entities could be engaged in the ‘business of banking’ is discussed. The continued use of ‘deposit’ as the traditional trigger for the ‘business of banking’ is investigated, alongside whether transaction and paymentcentric MFS rises to the ‘business of banking.’ An extensive evaluation of ‘money’ based on the Orthodox and Claim School economic theories is undertaken in relation to SVPs used in MFS, their legal associations and import, and whether they may be deemed ‘money’ in law. Consumer protection for MFS and payments generally through current statute, contract, and payment law and common law condictiones are found to be wanting. Possible regulatory arbitrage in relation to MFS in South African law is discussed. The legal and regulatory regimes in the European Union, Kenya and the United States of America are compared with South Africa. The need for a coordinated payments-specific law that has consumer protections, enables proportional risk-based licensing of new non-bank providers of MFS, and allows for a regulator for retail payments is recommended. The use of trust companies and trust accounts is recommended for protection of user funds. | vi<br>Public, Constitutional and International Law<br>LLD

This chapter begins with a discussion of the regulation of the issuance and use of electronic money. Initial sector-specific legislation was introduced by the EU in the form of the Directive on the taking up, pursuit of, and prudential supervision of the business of electronic money institutions. In the United Kingdom, the Financial Services and Markets Act 2000 designated the issue of e-money as a ‘regulated activity’ and particular provision to implement a Directive was made. The chapter then turns to the regulation of online gambling. It covers the Gambling Act 2005, licensing of remote gambling activities, and the Remote Gambling and Software Technical Standards.

This chapter incldes a discussion of the regulation of the issuance and use of electronic money giving particular attention to the emerging technology of cyber-currencies. Initial sector-specific legislation was introduced by the EU in the form of the Directive on the taking up, pursuit of, and prudential supervision of the business of electronic money institutions. In the United Kingdom, the Financial Services and Markets Act 2000 designated the issue of e-money as a ‘regulated activity’ and particular provision to implement a Directive was made. The chapter then turns to the regulation of online gambling. It covers the Gambling Act 2005, licensing of remote gambling activities, and the Remote Gambling and Software Technical Standards.

This chapter examines online payment methods, including the use of tokens, in electronic commerce. It first provides an overview of token payments before looking at alternative electronic payment systems including debt substitution, payment by credit cards, and fund transfer. The chapter reviews the failure of the European Commission’s Electronic Money Directive 2000 and examines whether the current law, found in the 2009 Electronic Money Directive, is likely to provide a better legal environment for electronic money to flourish. It spends considerable time looking at the development of cryptocurrencies, including bitcoin and how blockchain is used to establish trust in cryptocurrency transactions, before concluding with an analysis of the law in relation to cryptocurrency.