The Financial Services Authority announced on Wednesday that it is proposing a new regulatory regime for e-money issuers.
The UK regulator said in a statement that it aims to create a 'level playing field' for prospective issuers of electronic money, and to facilitate innovation in the developing field of e-commerce. The new rules are based on the requirements of new EU directives which are set to be incorporated into UK law in April 2002.
According to the FSA, the planned framework for e-money issuers focuses in the main on ensuring the financial soundness of institutions, and contains proposals to ensure that providers:
- 'Ring fence' their e-money activities from other areas of business risk
- Invest funds held in exchange for the issue of e-money in high quality liquid assets
- Ensure that sound and prudent systems and adequate internal control mechanisms are in place
- Comply with the FSA's money laundering requirements
The financial watchdog also stated that under the new rules, because e-money issuers are not covered by the Financial Services Compensation Scheme, they will be obliged to set limits as to the amount that can be held in an e-money account, in order to limit risk for their clients.
Responding to the FSA's announcement, Duncan Goldie-Scot, the Chairman of the Electronic Money Association (EMA) commented: 'This is an important step forward for e-money. The EMA is grateful for the open manner in which the FSA is addressing the needs of the industry. It welcomes the pragmatic nature of the regulatory framework and looks forward to full participation in the consultation process.'
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