The financial crisis coupled with the Covid19 pandemic have changed traditional banking. The financial market has seen the rise of novel, innovative business models and the shift to fintech solutions, enabling the advance of Electronic Money Institutions (EMIs). An EMI is a financial institution that issues electronic money, which can be used as an alternative to traditional currency. EMIs provide digital services that allow individuals and businesses to manage their money and make transactions online without having to visit a physical bank. With a growing demand for fast, convenient, and secure financial services, EMIs have become an attractive alternative to traditional banks.
Cyprus has established a favourable regulatory environment for EMIs, making it an attractive jurisdiction for EMI registration. In Cyprus, EMIs are regulated by the Central Bank of Cyprus (CBC) under the Electronic Money Law of 2012, which transposes the EU Electronic Money Directive into national law.
Who can apply?
Legal persons incorporated in Cyprus with an initial capital of minimum €350,000 with their registered and head office in Cyprus and must carry out at least part of their electronic money service business and/or provision of payment services that are not related with the issuing of electronic money in Cyprus.
How to apply?
In order to obtain an authorisation as an EMI, an application should be submitted to the Central Bank of Cyprus together with all the required documentation including corporate documents, a program of operations, setting out in particular the type of payment services envisaged, a business plan including a forecast budget for the first 3 financial years, a description of the governance arrangements and internal control mechanisms, including administrative, risk management and accounting procedures, and questionnaires for shareholders, directors and key function holders in order to assess their integrity, competence and experience. Furthermore, the EMI must have robust policies and procedures in place to prevent money laundering and terrorist financing as well as adequate security measures in place to protect against cyber threats and fraud.
Effect of authorization
Once authorization is granted, the EMI must within 6 months commence operations. In addition to the issue of electronic money, EMIs may engage in other activities, i.e. provide the payment services covered in their authorization, provide credit in connection with the provision of the payment services, operate payment systems and engage in operational and closely related ancillary services, which are related to the issue of electronic money or the provision of payment services. EMIs however, cannot accept deposits or other repayable funds.
The Central Bank of Cyprus maintains public registers of EMIs established in Cyprus with information on their branches, the persons authorised to distribute the electronic money issued and their agents where payment services are provided that are not related with the issuing of electronic money. Further, EMIs will need to comply with the regulatory capital requirements as well as reporting and operating requirements.
Once authorization is granted, an EMI can offer its services in all the EU member states on a cross border basis without any additional requirements for authorization or physical presence in those jurisdictions.
In conclusion, registering an EMI in Cyprus requires careful planning, thorough documentation, and compliance with regulatory requirements. EMIs are transforming the traditional banking landscape and providing a new level of efficiency and convenience.
With a favorable regulatory environment and access to the European market, Cyprus is an attractive jurisdiction for EMIs.
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