In this article, I’ll consider the electronic money issuing licenses in the UK. These are some of the most popular and versatile financial licenses for Fintech and crypto firms. The reason is simple: electronic money issuing licenses in the UK allows you to open bank accounts in the UK or the EU, a major benefit.
In today’s modern world, one thing is certain: Everything is going to end up being digitized in one way or another. The wise thing here would be to not fight it, but instead to embrace all of the opportunities that come with living in a digital world.
One topic that has generated a lot of discussion in recent years is how to properly manage and regulate the use of electronic money. Countries from all over the world have already begun to see the potential and the economic advantage it can bring to its jurisdiction if they decide to not only adopt it but promote it. Into this scene come the electronic money issuing licenses in the UK.
Every jurisdiction has a different idea of how electronic money should operate in their country. The only thing that they seem to share in common is that in order to become an electronic money institution you must comply with the appropriate due diligence that every financial institution must pass in order to be approved. This varies by country, but one of the best places right now to obtain an electronic money issuing license is in the United Kingdom.
An electronic money issuing licenses in the UK, or an electronic money institution (EMI), is a financial institution that is fully licensed to engage in payment services related to digital currency and electronic tokens. In most cases, the EMI can do business with any country in the world no matter where it is located.
Although a business can be done with any country around the world, choosing where to obtain an electronic money issuing license is very important. For example, if you obtain a license from the UK you can provide any sort of service within the European Economic Area.
To apply for a license you must first be registered as a company in the United Kingdom, your headquarters and your registered office have to be located in the country and have to prove to authorities that you have the capacity to provide security to the transaction and deposit of funds.
Other conditions that must be met in order to qualify for an Electronic Money Issuing License in the United Kingdom include:
– Have an approved business plan
– Hold adequate indemnity cover
– Your director and your manager must have a proven background in the field
– Every shareholder or anyone in a managerial position within the company must have a clean background with no penalties or criminal offenses
– Comply with Money Laundering Laws
There are two types of electronic money issuing licenses in the UK. The first is the Classic EMI which has a filing fee of €5,000 which must be paid to the Financial Conduct Authority.
The second type of license is the Small EMI, which is for businesses that their monthly turnover does not exceed the amount of €3,000,000. For this type of license, you must make a contribution to the Financial Conduct Authority of €1,000.
A couple of years ago the institution that regulated the due diligence of the licenses was called the Financial Service Authority, but this government agency has been disbanded. Present-day, you will have to comply with regulations under the Financial Conduct Authority and the Prudential Regulatory Authority working under the Bank of England.
The Financial Conduct Authority regulates the financial services industry in the United Kingdom, while the Prudential Regulatory Authority is part of the Bank of England and oversees the supervision of banks, credit unions, and major investment firms. As a result, electronic money issuing licenses in the UK are regulated more like banks than under the previous authority.
Once your license is approved you will have to put up capital of €350,000 in a local bank. This is also the minimum amount of money that must always be in your account if you want your Electronic Money Institution to keep operating.
It should also be noted that the process takes an estimated six months, so you should schedule accordingly. Also, the due dilligence on officers, directors, shareholders and key persons is intense.
For businesses that want to take a quicker route into obtaining an Electronic Money license in the United Kingdom, there is another thing you can do. You can partner with a financial institution in the United Kingdom that is already established, this way you don’t have to jump through so many hoops in order to get approved.
This is, of course, assuming that the financial institutions are in good standing and are complying with the same regulations that oversee the Electronic Money Institutions. The financial institutions that do not need to be registered or authorized include:
– Credit Institutions
– Credit Unions