Malta was one of the first EU jurisdictions to launch a specific regulatory regime for standalone e-Money Institutions (EMIs). Malta remains a prime location for running an EMI due to its competitive taxation regime, its robust IT infrastructure, a strong regulatory framework, and coupled with an eco-system of service providers which over the past 15 years has grown exponentially due to Malta’s strong positioning in e-commerce and i-gaming.
Today, Malta continues to be at the forefront of technology regulation and fintech, having been the first jurisdiction to enact specific DLT (Blockchain) and cryptocurrencies regulatory frameworks.
EMIs fall under the scope of the Financial Institutions Act [Chapter 376 of the Laws of Malta], and the transposed EU Electronic Money Directive which regulate e-Money institutions.
Apart from being authorised to issue electronic money, EMIs are entitled, subject to the MFSA’s prior authorisation, to engage in any of the following activities:
- the provision of certain payment services
- the granting of credit related to certain payment services, provided that any such credit is not granted from the funds received in exchange of electronic money and held in accordance with the prescribed safeguarding requirements
- the provision of operational services and closely related ancillary services in respect of the issuing of electronic money or to the provision of payment services referred to in point (i) above
- the operation of payment systems
- business activities other than the issuance of electronic money, having regard to the applicable law regulating such activities
Entities wishing to apply for an EMI licence are required to have a minimum of €350,000 in share capital. Licensed EMIs must ensure that their level of own funds does not fall below this amount of initial capital.
The Board must comprise at least two executive directors with financial services experience who will effectively direct the business of the e-money institution in Malta. The applicant must prove to possess the requirements to ensure prudent conduct of the EMI’s operations. Furthermore, the UBOs and key persons (including the compliance officer and the MLRO) must be fit and proper persons, possessing integrity and professionalism.
The EMI must also have adequate local presence in Malta to conduct its licensable activities in and from Malta. Furthermore, while authorised EMIs may outsource services, this is subject to the MFSA’s prior approval.
The EMI has to safeguard and segregate the funds representing e-money issued, and each EMI is liable for any shortfall. These principles are further protected under Maltese law by virtue of the Financial Institutions Act (Safeguarding of Funds) Regulations.
Being part of the European Union, an EMI licence holder has the right to passport across the EEA, provided certain regulatory criteria are met. Once the entity has been duly authorised by the MFSA, the EMI may exercise its right to passport to provide its services within the relevant EU/EEA State/s through the establishment of a branch or remotely, under the principle of freedom to provide services.
In order to apply for an EMI licence, the applicant must remit, together with the submission of the formal application, a one-time non-refundable licence application fee of €3,500, payable to the MFSA.
The annual supervisory fee is equivalent to 0.0002 of the total assets as reported at the end of the preceding year in the balance sheet, but never less than €2,500.
Article written by Senior Associate Dr Cherise Abela Grech.
Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.