The European Union promoted the concept of e-money alongside massive strides in technology to bolster the status of e-commerce in Europe and Malta was one of the first EU Member States to allow standalone Electronic Money Institutions (EMIs) based upon an attempt to remove the unnecessary rigidity surrounding this market. Amendments brought about by the transposition of the EU Electronic Money Institutions Directive (2009/110/EC) include the initial capital required to set up in Malta being decreased drastically from €1,000,000 to €350,000. Other amendments include the EMI's scope of activities being extended to also cover mixed business activities so as to be able to carry out unrelated payment services and the requirement and redemption rules being strengthened in order to increase consumer protection. All this coupled with the fact that the island has one of the most advanced telecoms networks, has substantially attracted the EMI market to Malta.. It is hoped that these two factors concurrently will help businesses who engage in both these sectors to create innovative changes to the payment market and help the e-market to expand further. It is estimated that the sum total of e-money transactions is to reach €10billion. All these advantages have helped newcomers and smaller companies to set up in Malta.
EMIs were previously regulated by the Banking Act (Chapter 371 of the Laws of Malta), however 2011 amendments have transferred EMIs to fall under the Financial Institutions Act (Chapter 376 of the laws of Malta), causing electronic money institutions to fall under a financial institution and ultimately creating a more attractive regime for EMIs. EMIs are defined as "a financial institution that has been licensed and authorized to issue electronic money or that holds an equivalent authorization in another country in terms of the Electronic Money Directive to issue electronic money" while Electronic money is defined by the Act as "electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions ... and which is accepted by a natural or legal person other than the financial institutions that issued the electronic money".
To set up an EMI in Malta, minimum registration requirements apply, namely, the minimum initial capital must be €350,000, a minimum of two persons must be able to direct the business in an effective manner, with sufficient expertise and good repute and who will carry out their business (both in terms of the head office and the activity of issuing of electronic money) in Malta, The same requirements of expertise and good repute also extend to the board of directors and managers who will constantly provide adequate information and carry out proper supervision.
Upon application one must provide a series of details which will include the initial capital, a detailed business plan and the identities and addresses of anybody involved in the business as set out in the Personal Questionnaires submitted to the MFSA.
The licensing process usually takes around 3 months from submission of the completed application form and supporting documentation. The applicant is subject to a minimum amount of fees, which have been reduced by 10% as a result of the 2011 amendments to the Financial Institutions Act. The EMI is also later eligible for various fiscal incentives in the form of refunds upon application offered by Malta's regulatory regime which proves very favorable for shareholders in comparison to other Member States.
An EMI can reap a plethora of benefits when setting up in Malta. More than 250 e-Gaming companies are set up in Malta requiring the provision of payment services. Operational costs such as salaries and rent are much lower than that of competing countries. Malta offers an optimum atmosphere, which successfully weathered the financial crisis, for the starting of new ventures while offering access to both Europe and the Mediterranean region. The financial regime also separates regulatory activity from promotional activity. The regulatory regime and a traditional banking sector, which is provided in English and also modeled on British law, is also constantly updated to keep abreast with market changes and new products while keeping in mind the importance of investor protection. Malta also offers a stable political environment coupled with an English-speaking workforce and an increasingly specialized service sector.
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