Electronic Money Institution (EMI) License in Cyprus

The Cyprus Electronic Money Laws of 2012 and 2018 regulate the issuance, storage, and management of electronic money (e-money) and payment services in the country. They transpose into local law EU Directive 2009/110/EC and EU Directive 2015/2366.

These laws set out the framework for the supervision and regulation of Electronic Money Institutions (EMIs) operating in Cyprus and provide a comprehensive legal framework for the protection of consumers and the stability of the financial system.

The Electronic Money Laws of 2012 established the legal framework for EMIs and defined the criteria for obtaining an EMI license, including capital adequacy requirements, fit and proper criteria for directors, and the requirement to have adequate systems and controls in place. This law also set out the conditions for the issuance and management of e-money, such as the requirement to maintain appropriate records and to keep customer funds separate from the EMIs’ own funds.

The Electronic Money Laws of 2018 introduced further changes and updates to the legal framework for EMIs in Cyprus, including the requirement for EMIs to comply with the revised Payment Services Directive (PSD2) and to implement strong customer authentication measures. The law also introduced new measures to enhance consumer protection, such as the requirement to have adequate insurance coverage and to provide customers with information about their rights and responsibilities.

The EU Directive 2009/110/EC is also known as the “Electronic Money Directive.” It is a European Union (EU) directive that provides a legal framework for the issuance and management of electronic money (e-money) in the EU. The directive aims to ensure a level playing field for all e-money issuers, and to protect consumers who use e-money products and services.

The Directive establishes a number of key requirements for EMIs, including:

1. Capital requirements: EMIs must maintain a minimum level of capital to ensure their financial stability. For Cyprus, the initial capital requirement currently stands at €350,000.
2. Licensing requirements: EMIs must obtain a license from the competent authority in their home country, and comply with all regulatory requirements.
3. Consumer protection: EMIs must take steps to protect consumer interests, including providing information about the terms and conditions of their e-money products and services.
4. Security: EMIs must implement appropriate measures to protect the security and confidentiality of customer data and transactions.
5. Anti-money laundering (AML) and counter-terrorism financing (CTF) measures: EMIs must comply with AML and CTF regulations to prevent the use of e-money for illegal activities.

The Directive applies to all EMIs operating within the EU, regardless of their home country, and sets a minimum standard for the regulation of e-money services in the EU. It is designed to ensure a level playing field for all e-money issuers, while protecting consumers who use e-money products and services.

The EU Directive 2015/2366 is also known as the “Payment Services Directive 2” (PSD2). It is a European Union (EU) directive that sets out new rules for payment services in the EU. PSD2 aims to create a level playing field for payment services providers, increase competition, and enhance consumer protection in the EU.

The key provisions of PSD2 include:

1. Strong customer authentication: PSD2 requires payment service providers to implement strong customer authentication (SCA) to secure online payments and protect consumers from fraud.
2. Access to account information: PSD2 gives authorized third-party providers (TPPs) access to customer account information with their consent, enabling them to provide new and innovative payment services.
3. Interchange fees: PSD2 limits the interchange fees that can be charged for card transactions, reducing the cost of cross-border payments.
4. Consumer protection: PSD2 strengthens consumer protection, requiring payment service providers to inform consumers of the rights and obligations related to their payment services.
5. Security: PSD2 requires payment service providers to implement appropriate security measures to protect customer data and transactions.

In summary, PSD2 is a comprehensive directive that sets new rules for payment services in the EU, aiming to create a level playing field, increase competition, and enhance consumer protection. The directive applies to all payment service providers operating in the EU, and has a significant impact on the payment services industry.

The application process for an Electronic Money Institution (EMI) license in Cyprus involves several steps:

1. Preparation of the Application: The first step is to gather all necessary information and documentation, including a detailed business plan, financial projections, due diligence reports, and other required information.
2. Submission of the Application: The completed application, along with all supporting documentation, is then submitted to the Central Bank of Cyprus, which is the regulatory authority responsible for supervising and regulating EMIs in the country.
3. Review of the Application: The Central Bank of Cyprus will review the application and supporting documentation to determine if the applicant meets the eligibility criteria and regulatory requirements for an EMI license. This process typically takes several months to complete.
4. On-site Inspection: If the application is approved, the Central Bank of Cyprus may conduct an on-site inspection of the applicant’s facilities to ensure that the company has the necessary systems, controls, and infrastructure in place to operate as an EMI.
5. License Issuance: If the applicant successfully completes the on-site inspection and meets all regulatory requirements, the Central Bank of Cyprus will issue the EMI license, allowing the company to commence operations.

It is important to note that the application process for an EMI license in Cyprus is complex and requires significant resources, including expertise in the electronic payment industry and regulatory compliance.

Electronic Money Institutions (EMIs) are authorised by the Central Bank of Cyprus to issue, store, and manage electronic money (e-money) and provide payment services. The activities and services provided by EMIs can vary depending on the specific business model of the company, but typically include the following:

1. Issuance of e-money: EMIs issue e-money in the form of electronic wallets, prepaid cards, or other similar products that allow customers to store and transfer funds electronically.
2. Payment services: EMIs provide payment services that allow customers to make payments to merchants and other individuals, either online or in-person. This may include card payment processing, direct debits, and other types of payment transactions.
3. Remittances: EMIs may also provide remittance services, allowing customers to transfer funds between different countries or regions.
4. Mobile banking: EMIs may offer mobile banking services, including mobile wallets and other payment solutions that allow customers to manage their funds and make payments using their mobile devices.
5. Customer service: EMIs are responsible for providing customer support and resolving any issues that may arise in the course of their operations.
6. Compliance with regulations: EMIs are required to comply with all applicable regulations and laws, including anti-money laundering (AML) and know-your-customer (KYC) regulations, as well as consumer protection and data protection laws.

There are several reasons why companies may choose to set up an Electronic Money Institution (EMI) in Cyprus:

1. Recognition in all EU Jurisdictions: The passporting system enables operations in all EU jurisdictions under a single license.
2. Access to SEPA: EMIs that are licensed and regulated by the Central Bank of Cyprus are allowed to provide payment services within the Single Euro Payments Area (SEPA).
3. Strategic location: Cyprus is strategically located at the crossroads of Europe, Asia, and Africa, making it an attractive location for companies that want to serve customers in these regions.
4. Business-friendly environment: Cyprus has a pro-business environment, with a well-developed infrastructure, low taxes, and a highly skilled workforce.
5. EU membership: Cyprus is a member of the European Union, providing companies with access to the single market and the benefits of EU membership, such as the freedom of movement of goods, services, and capital.
6. Low operating costs: Cyprus has low operating costs, making it an attractive location for companies that want to keep their overhead costs low.
7. Access to talent: Cyprus has a highly educated and skilled workforce, with a large pool of talent in areas such as finance, technology, and marketing.

EMIs provide a range of electronic payment and financial services to individuals and businesses, including the issuance of e-money, payment processing, remittances, mobile banking, and customer support. The specific services offered by an EMI will depend on the company’s business model and the needs of its target market.

Our law firm can assist with the formation of the company, legal support and regulatory licensing of Electronic Money Institutions (EMIs) in Cyprus. Our experience and competence allows your business to fully comply with EU Laws.