Introduction

In the modern world, where digital technologies are becoming increasingly important, the concept of money is also undergoing change. E-money, or electronic money, is a term that has been popping up with increasing frequency in recent years. In this article, we will take an in-depth look at the concept of e-money, examine its characteristics, use cases and related regulatory aspects.

Definition of e-money

E-money stands for electronic money and refers to a monetary value that is stored electronically. It is a digital equivalent of physical money and can be used for online transactions. E-money is typically used for transactions on the Internet, but can also be used for real-life transactions such as paying in stores via mobile payment systems.

Types of e-money

Prepaid cards and vouchers

One of the simplest forms of e-money is prepaid cards and vouchers. These contain a certain monetary value paid in advance and can be used to pay for goods and services.

E-wallets

E-wallets, or digital wallets, are applications that allow users to store and manage money electronically. E-wallets can be linked to bank accounts or credit cards and allow users to make payments via their cell phone or a computer.

Cryptocurrencies

Cryptocurrencies are a special form of e-money based on blockchain technology. They are decentralized and allow users to conduct transactions without the need for a central authority or intermediary.

Regulation of e-money

The regulation of e-money varies from country to country. In the European Union, for example, e-money is subject to the E-Money Directive, which sets out requirements for the issuance of e-money and the provision of e-money services. Different regulatory frameworks may apply in other countries.

Regulation of e-money in Germany under the ZAG

In Germany, e-money is regulated by the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG). The ZAG implements the EU Directive on Payment Services in the Internal Market and contains specific provisions for electronic money institutions. Electronic money institutions are entities that issue electronic money and provide related services. Under the ZAG, electronic money institutions must obtain permission from the German Federal Financial Supervisory Authority (BaFin) before they can offer their services.

Permit requirements include, but are not limited to, submission of a business plan, evidence of initial capital, and management information. Electronic money institutions must also meet certain organizational requirements to ensure that they have sufficient risk management procedures and internal controls.

Another important aspect of the ZAG is the protection of customer funds. Electronic money institutions are required to keep customers’ funds separate from their own funds. This is to ensure that customer funds are protected in the event of the electronic money institution’s insolvency.

It is also important to note that under the ZAG, e-money institutions are required to fulfill certain information obligations to their customers and to ensure that their services are transparent and fair.

Overall, regulation under the ZAG aims to ensure a high level of protection for e-money users while promoting the integrity and stability of the financial system.

Advantages of e-money

• Convenience: e-money enables quick and easy transactions without the need to use physical money.
• Worldwide transactions: E-money allows users to conduct transactions worldwide without having to worry about currency conversions.
• Reduced costs: In some cases, the cost of transactions with e-money can be lower than with traditional payment methods.

Disadvantages of e-money

• Security risks: As with all digital technologies, there is a risk of hacks and security breaches.
• Regulatory uncertainty: The regulation of e-money is not yet fully clarified in many countries, which can lead to uncertainty.
• Dependence on technology: using e-money requires access to modern technology, which can be a hurdle for some users.