Electronic Money Institutions in Malta

Malta as a favourable destination for Electronic Money Institutions (EMIs)

Malta’s attractive tax regime and its supportive regulatory framework not only make it easier for companies to streamline operations and foster innovation, but also helps them to gain credibility and expand their services across EU member states through EU passporting. Additionally, Malta offers a robust technological infrastructure, and a well-educated, English-speaking workforce which are critical assets for any financial institution, providing a dynamic environment that supports growth and innovation in the EMI sector. These advantages collectively position Malta as an ideal hub for EMIs looking to thrive in a competitive market. 

The Basics of E-Money 

In order to qualify as an EMI, there must be present two essential elements: prepaid electronic money together with the capability of transferring such electronic money freely to third parties. Electronic money, commonly known as e-money, is a digital alternative to traditional cash. It represents electronically stored monetary value, typically issued by a financial institution or technology company. E-money can be used for various financial activities, such as online purchases, bill payments, and peer-to-peer transfers. 

The Digital Advantage 

Unlike physical currency, electronic money exists exclusively in digital form and is stored on prepaid cards, digital wallets, or mobile payment apps. It provides convenience, security, and efficiency in financial transactions, enabling users to make payments quickly and securely without needing physical cash. Electronic money transactions are processed through electronic funds transfer systems, allowing for the seamless exchange of funds between parties. This form of digital currency has gained global popularity, transforming how people conduct financial transactions in an increasingly digital world. 

Licensing and Registration 

Companies wishing to issue electronic money in Malta, would need to comply with the licensing requirements as detailed in the Financial Institutions Act, Chapter 376 of the Laws of Malta (the ‘Act’) or otherwise hold an equivalent authorisation in another country in terms of the Electronic Money Directive. Applications to the Malta Financial Services Authority (‘MFSA’) for a license to operate as an EMI in Malta must be submitted in the designated form specified by the Financial Institution Rules (the 'Rules') which license will only be granted by the MFSA after thoroughly reviewing the application and ensuring that the provided documents and information meet all the requirements outlined in the Rules. 

Permitted Activities 

In addition to issuing electronic money, EMIs are authorised, subject to prior approval from the MFSA, to engage in the following activities: 

1. Providing payment services as detailed in the second schedule of the Act;
2. Granting credit related to certain payment services as detailed in the Act given that it is not granted from the funds received in exchange of electronic money and held in accordance with safeguarding requires prescribed. Credit can only be granted when:
   • credit is ancillary and granted exclusively in connection with the execution of a transaction;
   • nothithstanding national rules on providung credit by credit cards, the credit granted in connection with a payment and executed with the act shall be repaid within a short period which shall in no case exceed twelve months;
   • such credit is not granted from the funds received or held for the purpose of executing a payment transaction;
   • and the own funds of the payment institution are at all times and, to the satisfaction of the competent authority, appropriate in view of the overall amount of credit granted. 
3. Offering operational services and closely related ancillary services concerning the issuance of electronic money or the provision of payment services referred to in point 1 above.
4. Operating payment systems as defined in the second schedule of the Act; and 
5. Conducting business activities other than the issuance of electronic money, in accordance with the applicable law regulating such activities 

Passporting, Agents and Distributors 

A license to operate as an EMI shall be valid in all Member States and shall allow the EMI to issue, redeem or distribute electronic money in another Member State either through the establishment of a branch by exercising the right to establishment or by exercising its right under the freedom to provide services. A licensed EMI may also provide payment services and, or distribute and, or redeem electronic money in another Member State through an agent and, or a distributor, as applicable. In order to exercise such powers, a licensed EMI is required to give notice to the MFSA of such an intention, which notice shall contain the necessary information as prescribed in the Act. 

Main Requirements for obtaining an EMI License 

• Minimum initial share capital of EUR 350,000. Licensed EMIs shall ensure that their own funds do not fall below this amount of initial share capital, or the amount of own funds as calculated in accordance with the Rules, whichever is higher. 

 

• At least two individuals to effectively manage the EMI’s operations from Malta. Such individuals must have a good reputation and sufficient experience to occupy such roles. For the MFSA to form such an opinion, such individuals along other key personnel within the institution and any qualifying shareholders, will be subject to certain due diligence procedures as prescribed by the MFSA;

 

• Sound and prudent management and robust governance arrangements. Such arrangements must include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective procedures to identify, manage, monitor and report the risks to which it is or might be exposed, and adequate internal control mechanisms, including sound administrative and accounting procedures. The MFSA will also expect that a part of such management be effectively carried out in Malta; 

 

• Head office and its registered office in Malta and shall carry out at least part of its licensable activities in Malta; 

 

How much does an EMI Licence cost? 

MFSA imposes the following costs on financial institutions: a one-time application and processing fee of EUR 3,500 payable upon submission of a license application, and an annual supervision fee. Such supervision fee is a percentage of the total items on the balance sheet, but not less than EUR 2,500.

Written by Dr. Daisy Grima, Junior Lawyer and Ms. Suzana-Marie Tabone, Junior Lawyer (BDO Malta Legal Team)

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