European Commission Hints at Future Changes to the Second Electronic Money Directive

The European Commission has published a report to the European Parliament and the Council of the European Union on the implementation and impact of the second Electronic Money Directive, known as 2EMD. 2EMD establishes a legal framework for the issuance and redemption of e-money and covers the rights and obligations linked to the redemption of funds by consumers, the licensing of e-money institutions and the prudential requirements applicable to e-money institutions, which updates the regime under the first Electronic Money Directive to align it with requirements on payment institutions under the revised Payment Services Directive. It applies to e-money service providers in the EEA. The regime has been sparsely used in practice, with few firms operating under its auspices.

2EMD requires the Commission to assess its implementation and impact and to propose legislative changes, if appropriate. The report was due on November 1, 2012, however, the Commission delayed its publication because a majority of member states had failed to transpose 2EMD into their national laws by the transposition date of April 2011. The Commission also wanted to take into account the impact of PSD2, which includes numerous cross-references to 2EMD.

The Commission is of the view that 2EMD has mostly achieved its objective of removing barriers to market entry. The Commission notes that improvements could be made to the existing regulatory framework in the short to medium term through guidance on the classification of products as e-money, the application of the limited network provision and the distinction between an agent and a distributor in the context of e-money. In addition, harmonizing certain provisions, in particular the optional waiver for small e-money institutions, should be considered in the long term as well as the development of an intermediate category of a 'large limited network', which would only be subject to certain parts of 2EMD. The Commission's view is that any revision to 2EMD should only be acted upon once more is known about the impact of PSD2 and the Fourth Money Laundering Directive on e-money institutions.

View the report.

View the annex to the report.