- within Environment, Transport and Insolvency/Bankruptcy/Re-Structuring topic(s)
On 18 December 2025, the Central Bank of Ireland (Central Bank) issued a Dear CEO letter to Electronic Money Institutions (EMIs) to highlight a European Commission response regarding the definition of 'electronic money' contained in a Q&A published on 17 January 2025, regarding the second Electronic Money Directive (EMD2).
The Central Bank highlights that the European Commission's response (in relation to Question ID 2022_6336 available here) may impact several electronic money institutions.
The European Commission's response adopts a relatively narrow interpretation of the definition of 'electronic money'. Basing its response on the wording of EMD2 and European case law, the European Commission's response found that the condition of acceptance in the definition of 'electronic money' in EMD2 requires:
- the conversion of funds received by the electronic money issuer into electronically or magnetically stored money (transferability); and
- a direct contractual arrangement between the third-party payee and the issuer (voluntary acceptance).
The European Commission also found that reception by the third-party payee of funds (scriptural money) resulting from the redemption of electronic money does not meet the acceptance criterion.
The Dear CEO letter also highlights the European Commission's conclusion in the Q&A that the issuance of prepaid cards that operate on 4-party card schemes (such as Visa or Mastercard) could not qualify as electronic money issuance, as there is no acceptance of electronic money by a party other than the issuer.
The Central Bank has asked EMIs to consider what, if any, impacts the Q&A may have on their business model, and what potential actions they will need to take. The Central Bank has indicated that the clarification may potentially require some activities currently classified as the issuance of electronic money to be reclassified as payment services. This may impact a number of requirements firms are subject to, including own funds, distributor classifications, passport notifications, regulatory reporting, customer contracts and advertising.
Background to Q&A
Question
The question, which was submitted in 2022 by a credit institution that issued prepaid cards connected to a global general payment card scheme, asks:
"whether the wording "accepted by a natural or legal person other than the electronic money issuer" in the definition of electronic money (article 2(2) of EMD2) implies that a third party (payee) must become the holder of the electronic money as such and thus that there must be a direct contractual arrangement between the e-money issuer and all payees (obligating the payees to accept the issued e-money as a means of payment and granting the payees a right of redemption of the e-money); or
should the criterion that a third party must "accept the electronically stored monetary value" be considered to be met where a third party payee accepts a customer's payment with a card that is backed by the customer's e-money (as per the description above), regardless of the fact that the payee will not become a holder of the issued e-money as such?".
For context, the credit institution had its EMI license application under EMD2 rejected by a local regulator, which interpreted the wording in article 2(2) EMD2 as meaning there must be another party than the issuer that accepts the electronic money (not just the electronically stored monetary value) as a means of payment by becoming a holder of the electronic money (meaning that an agreement must be in place in accordance with article 11(3) EMD2).
The local regulator viewed that there was no issuance of electronic money in a situation where no third-party payee becomes the holder of the issued electronic money (other than the EMI's customer holding the electronic money).
The questioner contended that the wording of the directive and the local transposition did not require payees to accept the electronic money as a means of payment, nor did it require payees to enter into direct agreements with the issuer.
Answer
The EU Commission's answer cites:
1. EMD2;
Article 2(2) EMD2 provides:
"Electronic money' means 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 as defined in point 5 of Article 4 of Directive 2007/64/EC, and which is accepted by a natural or legal person other than the electronic money issuer".
Recital 18 of EMD2 provides:
"electronic money needs to be redeemable to preserve the confidence of the electronic money holder", thereby classifying redeemability as "an intrinsic feature of electronic money".
Article 11 EMD2, provides:
- that the conditions of redemption should be stated in the contract between the e-money issuer and the e-money holder (Article 11(3)); and
- that the redemption rights of a person, other than a consumer, who accepts e-money shall be subject to the contractual agreement between the issuer and that person (Article 11(7));
and
2. a Court of Justice of the European Union (CJEU) ruling in case C 661/22 (CJEU ruling) which found that:
- electronic money is "a monetary asset separate from the funds received";
- the creation of that separate monetary asset requires not only the reception of funds by the issuer, but also the consent of the user for the issuance of electronic money, represented by a contractual agreement between the user and the electronic money issuer; and
- with relevance for the acceptance side, there was no issuance of electronic money in the case in question, where there was no "conversion of funds received into an electronically, including magnetically, stored money "which could be used by a network of customers who would accept it voluntarily";
to support its ultimate reasoning that the prepaid card was outside the scope of the definition of 'electronic money' by reason of the following elements:
- as the payees (merchants in this case) are paid in scriptural money, there is no acceptance of electronic money by a party other than the issuer in the case in question;
- the acceptance of electronic money whereby the person who accepts electronic money becomes a holder of electronic money, should be understood to require a contractual arrangement with the electronic money issuer.
Our thoughts
Although as a response to an EBA Q&A the European Commission's response is not legally binding, its interpretation of electronic money in the Q&A poses operational and regulatory uncertainty for many EMIs as the European Commission's interpretation of 'electronic money' is relatively narrow and it diverges from established industry and regulatory understanding to date and does not align with how many EMIs operate in practice.
The Central Bank Dear CEO Letter of 18 December 2025 has not expressly confirmed whether it is adopting the European Commission's interpretation of 'electronic money' in its January 2025 response to a question posed in 2022, and it remains to be seen, following the Central Bank's proposed engagement with EMIs in early 2026, how and to what extent EMIs will be impacted in practice.
Next Steps
The Central Bank has committed to contacting firms in the New Year to discuss each firm's considerations of any impact of this European Commission clarification on its business model and any steps that affected firms will be required to take.
In the meantime, EMIs are advised by the Central Bank to consider what, if any, impacts the Q&A may have on their business model, and what potential actions should be taken and William Fry is available to assist firms in their analysis of any potential impact and on their preparation for this engagement with the Central Bank.
Contributed by: Jane Balfe
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