Article published in the journal DB – Non solo Diritto Bancario, available at this link
1. Introduction
Recently, the EBA, through a soft law instrument that generated a mix of interest and some sense of disorientation, intervened on the definitional framework of electronic money, offering an interpretative reading of European rules that is, in certain respects, innovative.
This refers to Q&A 2022_6336[1], published on 17 January 2025, through which the EBA stated that the notion of electronic money—defined in Article 2, paragraph 2, of Directive 2009/110/EC (“EMD2”) as “monetary value stored electronically, including magnetically, representing a claim on the issuer, issued on receipt of funds for the purpose of making payment transactions as defined in Article 4, point 5, of Directive 2007/64/EC, and accepted by a natural or legal person other than the electronic money issuer”—would imply, for the configuration of the phenomenon, that the payee must receive the money in the same form as the electronic money, thereby excluding the possibility that payments could also be made in scriptural money or through other types of funds (“Q&A e-money”).
It is worth noting that this pronouncement of the EBA was prompted by a Lithuanian start-up, whose authorization to operate as an electronic money institution was denied by the local supervisory authority, because the payment cards issued by the applicant company, which could be used to make payments according to the schemes of international payment networks, could not qualify as electronic money. According to the local regulatory authority, the formulation “accepted by a natural or legal person other than the electronic money issuer” contained in the aforementioned Article 2 of the EMD2 should be understood to mean that, in order for electronic money to be issued, there must exist another party, in addition to the issuer, that accepts the electronic money (not simply the electronically stored monetary value) as a means of payment, thereby becoming a holder of electronic money.
Sharing this line of thought, the EBA believes that the payee of electronic money should have previously agreed to receive payments in electronic money through the conclusion of a contractual agreement with the issuing intermediary, analogous to the one established between the electronic money holder, acting as payer, and the same issuer; in this way, according to the EBA, electronic money would not be converted or reimbursed, but transferred within a network of users bound by a contractual link with the same issuer, who have agreed to settle payments by exchanging electronic money.
The stance expressed by the EBA raises, among other things, the question of whether open electronic money schemes, characterized by the fact that the holder can spend their credit with the issuer in favor of a broad and indeterminate set of potential payees, are compatible with the legal qualification offered by the European Authority. In other words, whether the characteristic of general spendability, traditionally recognized for electronic money, should be reconsidered.
These brief reflections are dedicated to this topic.
2. The current regulatory framework: defining features of electronic money
To assess the possible impacts of the EBA intervention, it seems appropriate to start from the regulatory provisions that outline its characteristic features.
2.1
According to Article 1, paragraph 2, h-ter), of the Italian Banking Act (TUB), which transposes the notion set out in Article 2, paragraph 2, of the EMD2 Directive, electronic money is defined as “monetary value stored electronically, including magnetically, represented by a claim on the issuer, issued for the purpose of carrying out payment transactions as defined in Article 1, paragraph 1, letter c), of Legislative Decree No. 11 of 27 January 2010, and accepted by natural and legal persons other than the issuer”[2].
The definitional provision immediately clarifies what does not constitute electronic money:
- “the monetary value stored on instruments referred to in Article 2, paragraph 2, letter m), of Legislative Decree No. 11 of 27 January 2010 (i.e., instruments that can be used to purchase goods or services only at the location used by the issuer or under a commercial agreement with the issuer within a limited network of service providers and with a limited range of goods or services[3]);
- the monetary value used for payment transactions referred to in Article 2, paragraph 2, letter n), of Legislative Decree No. 11 of 27 January 2010” (i.e., payment transactions carried out using certain telecommunication devices and under the conditions set out therein).
As is well known, the legislative choice to qualify electronic money as a credit stored electronically, regardless of the technological solutions adopted, aims, in continuity with the initial notion contained in Directive 2000/46/EC[4], to keep it open to future technological developments[5].
This notion clearly expresses the first characteristic of electronic money, which consists in the conversion of received funds into electronic money pursuant to Article 114-quater, second paragraph, of the TUB (a conversion that must be immediate by electronic money institutions, while banks may defer it, being authorized to receive and hold deposits).
The second fundamental characteristic of electronic money is its payment function, as it is conceived as a substitute for public money and therefore as a generally spendable instrument, suitable for making “payment transactions”; for the latter, the reference to the definitional framework of Legislative Decree No. 11/2010, which transposes Directive 2015/2366/EU (“PSD2”), allows the inclusion of any “activity carried out by the payer or the payee to deposit, transfer, or withdraw funds, regardless of any underlying obligations between payer and payee.”
It follows, therefore, that, in causal terms, electronic money is issued by the authorized intermediary to allow the user to make payment transactions using “funds,” a notion currently enshrined in Article 1, paragraph 1, letter m), of Legislative Decree No. 11, which includes, in addition to public money (i.e., banknotes and coins) and electronic money, also scriptural money, i.e., bank-created money[6].
Accordingly, under the legislative provisions recalled above, electronic money can be “spent” also through the transfer of scriptural money, for example via the use of a payment card incorporating it or by issuing a transfer order from the wallet on which it is preloaded.
The third characteristic of electronic money is redeemability, at any time and at face value, of the remaining monetary value (i.e., the unspent amount) in favor of its holder, according to the contractually agreed procedures (Article 114-ter TUB, in accordance with Article 11, paragraph 2, of the EMD2 Directive).
It is also appropriate to note, from a de iure condendo perspective, that the regulatory framework outlined above does not appear destined to undergo substantial changes as a result of the anticipated—and now imminent—adoption of the new Payment Services Directive (“PSD3”), which, together with the Payment Services Regulation (“PSR”), will constitute the new unified regulatory framework for the provision of all payment services in the European Union[7].
The definition of electronic money provided by PSD3 is, in fact, consistent with the current EMD2 regime, particularly regarding the highlighted features of immediate conversion of received funds into money, redeemability, and payment function[8].
Therefore, the critical reflections raised by the Q&A e-money in terms of electronic money qualification do not appear likely to be overridden by the forthcoming regulatory framework.
2.2 Jurisprudential interpretations
Given this regulatory framework, it is worth observing that, to support the opinion that the legal requirements of the case extend to the existence of a contractual agreement between the issuer and the payee, obliged to accept electronic money as a means of payment, the EBA only refers to certain passages of the Court of Justice’s ABC Projekt I judgment (C-661/22)[9].
It should be noted that this judgment was issued following a preliminary ruling in a dispute brought by a payment institution whose authorization to operate had been revoked by the Lithuanian national authority, because it allegedly held client funds for an excessively long period, constituting—according to the accusation—unauthorized issuance of electronic money.
From this precedent, the EBA extrapolates the following concepts:
- Electronic money is “a monetary activity distinct from the funds received” (paragraph 47);
- The creation of this separate monetary activity requires not only the receipt of funds by the issuer but also the user’s consent to the issuance of electronic money (paragraph 48);
- Acceptance of electronic money, under which the person accepting the electronic money becomes a holder of electronic money, implies the existence of a prior contractual agreement with the electronic money issuer, pursuant to the principles and rules governing the redeemability of electronic money; in particular, the EBA refers to Article 11, paragraph 3, of the EMD2, which provides that the redemption conditions must be set out in the contract between the electronic money issuer and the holder of electronic money, as well as paragraph 7 of the same article, which establishes that “the redemption rights of a person, other than a consumer, who accepts electronic money are subject to the contractual agreement between the electronic money issuer and that person” (paragraph 49).
In motivating this conclusion, it is worth noting that the EBA does not mention other rulings of the Court of Justice in this area, among which the important Paysera judgment (C-389/17) deserves mention, whose reasoning does not seem to have been superseded by the aforementioned ABC Projekt I ruling[10].
The Paysera case concerned a Lithuanian EMI whose application of the rules on the calculation of electronic money institutions’ own funds was challenged by the local central bank, asserting, as relevant here, that transfers made by an electronic money holder from an electronic money account held at an EMI to third-party accounts at credit institutions would not be “payment services linked to the issuance of electronic money,” with substantial implications for capital requirements, given the more burdensome prudential regime applicable to payment services not linked to electronic money issuance[11].
In the resulting dispute, the Lithuanian Supreme Court asked the Court of Justice, in a preliminary ruling, whether Article 5(2) in conjunction with Article 6(1)(a) of the EMD2 should be interpreted to mean that the aforementioned services should be considered as payment services linked to the issuance of electronic money.
The Court responded affirmatively, reasoning that the transfer of funds to a third-party beneficiary not holding an electronic money account nevertheless entails, upon the payer’s instruction, the reimbursement of the funds at face value to the electronic money holder, preparatory to their transfer to the third party’s bank account, so that the payment service should in any case be considered linked to the issuance of electronic money.
In doing so, the Court of Justice, rightly, recognized the existence of a unitary cycle of electronic money, encompassing issuance and redemption, and, above all, confirmed that the use of electronic money to make payments to third parties not bound by a contractual relationship with the EMI is not foreign to the concept of electronic money.
3. Electronic Money: Instruments, Forms, and Target Segments in the Italian Market
The current regulatory framework has fostered the development of payments made using electronic money and, more generally, electronic payments, which have experienced structural and steady growth, supported by the expansion of e-commerce and the gradual diffusion of digital technologies.
In this context of continuous growth in digital payments, it is particularly important to clarify how electronic money differs from other more widespread payment instruments. Indeed, while from the end-user’s perspective they may seem similar, legally their nature, the rules governing them, and the responsibilities of the operators involved are profoundly different; it is precisely this structural difference that allows a better understanding of the specific role of electronic money.
The distinction between electronic money and debit cards is not merely technological but concerns the legal structure of the underlying relationship.
As is well known, a debit card constitutes an instrument for accessing a payment account, through which the user issues a direct debit order of the funds available in the bank account. Payment thus occurs through the immediate movement of deposited funds, with the direct involvement of the traditional banking system.
Electronic money, on the other hand, is based, as noted, on the mechanism of the immediate conversion of funds deposited by the holder. As already emphasized, payment through electronic money does not involve a direct debit on a bank account but rather the use of value already issued.
This structural distinction is a key element for the use of electronic money compared to a debit card, as it affects the limitation of instrument risk or, at least, its perception. In the case of a debit card, direct access to the bank account may lead the customer to perceive a greater exposure to the risk of unauthorized withdrawals or fraudulent use impacting the entire bank balance. Electronic money, instead, allows the risk to be limited to the preloaded amount, as the spendable value is predetermined and there is no direct access to the bank account.
3.1 Target Segments
As previously noted, electronic money can be used without opening a traditional bank account, and the legal relationship is directly between the user and the issuer.
This autonomy addresses needs for:
- Financial inclusion
- Contractual simplification
- Access to payment services by individuals without a bank account
Based on these aspects, and as reported in a 2009 AGCM survey[12]—still relevant today—the main target segments can be described as follows:
- “Unbanked/underbanked” consumers: young people or, in general, users who, for various reasons, cannot or do not want to open bank accounts and intend to use increasingly digital solutions;
- Households/companies seeking budget control: prepaid cards (or wallets with balances) are often used as a digital “purse,” allowing limits on spending or better monitoring;
- More risk-averse consumers: general clients, both “banked” and unbanked, for certain types of transactions perceived as higher risk, e.g., online purchases or foreign transactions.
3.2 Instruments and Forms of Electronic Money: An Operational Map
In line with the principle of technological neutrality, electronic money is characterized by its immateriality, as the monetary value can be stored on electronic cards and/or digital devices/applications.
3.2.1 Prepaid Card-Based Electronic Money
In the market, open and closed models have developed, depending on the scope of the payment network.
- Open-loop prepaid cards operate on generalist circuits (e.g., Visa/Mastercard) and allow payments to a broad range of merchants, serving a generally spendable function.
- Closed-loop prepaid cards are spendable within a limited circuit (a single issuer/network: telecommunications, pay-TV, retail).
As can be imagined, open-loop prepaid cards perform functions at least partially similar to bank accounts as payment access instruments, while closed-loop cards mainly serve loyalty/accessory purposes within a proprietary ecosystem.
As indicated in the recent report by the Payments Committee on fraudulent payment transactions in Italy (1st half of 2025), “in Italy, electronic money has largely spread through prepaid payment instruments based on a four-party card scheme, while in other countries, especially in continental Europe, it has predominantly developed within so-called closed-loop payment schemes. In these schemes, users make and receive payments through accounts (or digital wallets) rooted in a network independent of the banking system, where the infrastructure operator, the instrument issuer, and the acquirer ensuring acceptance are generally the same entity (e.g., PayPal).”
3.2.2 Software-Based Electronic Money: E-Wallets and Payment Accounts at EMIs
In recent years, there has been a growing share of digital wallets and apps, in which electronic money often manifests as a prepaid balance managed in an electronic money account or designated wallet, through which the holder can make payments to third parties within an open-loop or closed-loop payment scheme, similarly to card-based operations.
3.2.3 New Frontiers: Electronic Money Tokens and MiCA
A further impulse to the spread of electronic money is expected from European crypto-asset regulation. Among the activities under Regulation (EU) 2023/1114 (the “MiCAR”), the issuance/offer of electronic money tokens (“EMTs”) is included, which Article 48, paragraph 2, of the Regulation equates with electronic money, thus incorporating it into the broader notion of funds[13].
In this way, the perimeter of e-money is expected to expand, potentially becoming a reference for further forms of regulated digital value, with significant implications for transparency, fund safeguarding, and governance.
4. Concluding Remarks
Based on the above considerations, with regard to the current regulatory framework governing electronic money (which is expected to be confirmed under the PSD3/PSR reform) and considering market practice that has seen the evolution of diverse digital payment instruments incorporating preloaded monetary value, it can be asserted that the Q&A e-money should not affect or limit open-loop electronic money schemes.
As previously noted, to ensure its primary payment function, electronic money must be usable in an open-loop network, allowing the holder to transfer funds to third parties who do not maintain a contractual relationship with the issuer, without undermining the requirements for digitally stored monetary value to qualify as electronic money. The Paysera case demonstrates how payment in scriptural money to third-party bank account holders constitutes an ordinary use of electronic money, comparable to a form of redemption that reduces the residual claim of the holder against the issuer.
Otherwise, one would arrive at the paradox of granting electronic money status only to that issued within “closed” schemes, which, based on the PSD2 exemption transposed into national law, do not constitute payment services reserved for authorized entities.
Furthermore, if the legal qualification of electronic money depended on how the holder intended to use it, another paradox would arise: the constitutive requirements of the instrument would derive from events relating to the execution phase of the contractual relationship between issuer and holder.
Indeed, the EBA’s stance seems to relate to the prudential regime for the issuer’s own funds, considering that payment services linked to the issuance and/or redemption of electronic money require a more favorable capital absorption compared to that applicable to payment institutions regarding services not linked to electronic money issuance.
In this perspective, for the correct determination of capital requirements for the services provided, a regulatory clarification on the scope of payment services objectively linked to the issuance and/or redemption of electronic money would be desirable, to draw a clear line relative to payment services exercisable by a payment institution.
The forthcoming PSD3 directive, or its implementation context, could provide the appropriate opportunity for such intervention.
