ELM 1.3 Restriction on issuing e-money

Article 1(4) of the E-Money Directive says that Member States shall prohibit persons or undertakings that are not credit institutions from carrying on the business of issuing electronic money. The purpose is to ensure that only persons who are subject to a prudential regime designed to deal with the risks of issuing e-money engage in that activity.

For persons who are not firms, this is implemented by the general prohibition. For firms, this is achieved by the rules in ELM. The definition of ELMI covers any firm whose permitted activities include issuing e-money. Only a bank, building society, incoming Treaty firm and incoming EEA firm are excluded. If a firm falls into the definition of an ELMI, all the rules in ELM about ELMIs apply. These include ELM 4.3.1 R (Restriction on activities), which prevents an ELMI from doing anything except issuing e-money and certain related activities. Therefore if a firm (other than a building society) wishes to have a Part IV permission that includes issuing e-money, it will either have to become an ELMI, and accept the restrictions that come with that status, or become a bank.

However, article 8 of the E-Money Directive says that EEA States may allow their competent authorities to waive the application of some or all of the provisions of that Directive and the application of the Banking Consolidation Directive to certain small or local e-money schemes. The regime for such schemes is described in ELM 8. Even though a small e-money issuer does not have a Part IV permission that includes issuing e-money, it does not infringe the general prohibition by issuing e-money.