The Electronic Money Directive

The Electronic Money Directive (EMD) was introduced in 2001 in response to the emergence of new pre-paid electronic payment products. Its prime function was to establish a regulatory regime for e-money issuers across the Community, with the aim of creating a legal framework for the e-money market so that it could deliver its full potential. Whilst ensuring an adequate level of prudential supervision, it intended to encourage new market entrants to the e-money market, so as to promote competition between non-banks and banks.

In the UK, the EMD implemented through the Financial Services and Markets Act (FSMA) in 2002, with UK e-money issuers subject to FSA rules.

Following a Commission review on the application of the Directive, in October 2008, the Commission published a proposal to repeal the existing Directive and to replace it with a revised EMD, with the aim of further enabling the growth of the e-money market. In particular, the Commission proposed that the revised EMD should provide:

clarity on the definition of e-money and the scope of the Directive;
a consistent legal framework, including a proportionate prudential regime, waivers and passporting procedures for non-bank e-money issuers; and
an alignment, where appropriate, with the Payment Services Directive.

Documents and publications

In October 2001, the Treasury consulted on its proposals for implementing the EMD into UK law. These proposals were revised in light of consultation responses. On 14 March 2002, the statutory instrument (SI) - The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2002 - was made and laid before Parliament. On 21 March 2002, a second SI - The Electronic Money (Miscellaneous Amendments) Regulations 2002 - was made and laid before Parliament. On 27 April 2002, the regime for e-money issuers, in the UK came into force.

Implementation of the Electronic Money Directive

In October 2008, the Commission published proposals for revising. On 20 January 2009, the Government launched a consultation to seek stakholders’ views to on the UK’s negotiating appraoch to revising the EMD in the Council of Ministers.