Introduction to Electronic Money Institutions
The Central Bank of Ireland issued a letter to Electronic Money Institutions (EMIs) on December 18, 2025, regarding a European Commission response about the definition of ‘electronic money’. This response may impact several electronic money institutions.
What the European Commission Said
The European Commission’s response adopts a narrow interpretation of the definition of ‘electronic money’. According to the Commission, the condition of acceptance in the definition of ‘electronic money’ requires two things:
- The conversion of funds received by the electronic money issuer into electronically or magnetically stored money (transferability)
- A direct contractual arrangement between the third-party payee and the issuer (voluntary acceptance)
The European Commission also found that reception by the third-party payee of funds (scriptural money) resulting from the redemption of electronic money does not meet the acceptance criterion.
Impact on Prepaid Cards
The European Commission’s conclusion also states that the issuance of prepaid cards that operate on 4-party card schemes (such as Visa or Mastercard) could not qualify as electronic money issuance. This is because there is no acceptance of electronic money by a party other than the issuer.
What This Means for EMIs
The Central Bank has asked EMIs to consider what, if any, impacts the Q&A may have on their business model, and what potential actions they will need to take. The Central Bank has indicated that the clarification may potentially require some activities currently classified as the issuance of electronic money to be reclassified as payment services. This may impact a number of requirements firms are subject to, including own funds, distributor classifications, passport notifications, regulatory reporting, customer contracts, and advertising.
Background to the Q&A
The question that led to the European Commission’s response was submitted in 2022 by a credit institution that issued prepaid cards connected to a global general payment card scheme. The question asked whether the wording "accepted by a natural or legal person other than the electronic money issuer" in the definition of electronic money implies that a third party (payee) must become the holder of the electronic money as such.
The Question
The credit institution had its EMI license application under EMD2 rejected by a local regulator, which interpreted the wording in article 2(2) EMD2 as meaning there must be another party than the issuer that accepts the electronic money (not just the electronically stored monetary value) as a means of payment by becoming a holder of the electronic money.
The Answer
The EU Commission’s answer cites EMD2 and a Court of Justice of the European Union (CJEU) ruling in case C 661/22. The Commission found that electronic money is "a monetary asset separate from the funds received" and that the creation of that separate monetary asset requires not only the reception of funds by the issuer, but also the consent of the user for the issuance of electronic money, represented by a contractual agreement between the user and the electronic money issuer.
Our Thoughts
Although the European Commission’s response is not legally binding, its interpretation of electronic money poses operational and regulatory uncertainty for many EMIs. The interpretation is relatively narrow and diverges from established industry and regulatory understanding to date and does not align with how many EMIs operate in practice.
Next Steps
The Central Bank has committed to contacting firms in the New Year to discuss each firm’s considerations of any impact of this European Commission clarification on its business model and any steps that affected firms will be required to take. EMIs are advised to consider what, if any, impacts the Q&A may have on their business model, and what potential actions should be taken.
Conclusion
In conclusion, the European Commission’s response to the Q&A has significant implications for Electronic Money Institutions. The narrow interpretation of the definition of ‘electronic money’ may require some activities currently classified as the issuance of electronic money to be reclassified as payment services. EMIs should carefully consider the potential impacts on their business model and take necessary steps to ensure compliance with regulatory requirements. It is essential for EMIs to seek professional advice to navigate the complexities of the European Commission’s response and ensure a smooth transition.
