The Financial Supervisory Authority of Iceland (FME) has approved Reykjavik-based Monerium as its first electronic money institution. It’s the first time that electronic money has been approved for use over a blockchain.
This means that Monerium has regulatory approval to provide fiat payment services on a blockchain and use it throughout the European Economic Area.
Sveinn Valfells, CEO and co-founder of Monerium told Coindesk that working under an established framework gives it a competitive advantage: “For practical purposes, fiat will be the currency most people and institutions will want to use in the near- and medium-term. And if you are touching fiat in any way, you just have to comply with the relevant regulations.”
The ConsenSys-backed Monerium will initially operate using the ethereum blockchain — though it is prepared to operate across public and private distributed ledgers, allowing expenditures and transfers to be made without an intermediary. Monerium cofounder Jon H. Egilsson, formerly chairman of the Supervisory Board of the Icelandic Central Bank, said, “Monerium e-money encompasses the benefits of programmable money on blockchain, in addition to being the closest form of central bank money there is — based on a proven EU regulatory framework.”
The legal concept of an electronic money institution (EMI) dates back to the financial crisis, established in a 2009 act by the European Union. The rule is primarily used now for prepaid debit cards.
Egilsson’s remarked: “Unlike bank deposits, an electronic institution (EMI) must safeguard clients funds separately from any other financial activities, such as lending. Instead, customer funds are invested in a segregated portfolio of high-quality liquid instruments along with regulatory minimum reserves. The structure is similar to a high-grade money market fund.”
By putting e-money on the blockchain, it also enables cross-border payments without a financial intermediary. The company plans to start with Icelandic krona (ISK). Once live, Monerium’s version of ISK will be usable throughout the EU and should shortly be usable in many other parts of the world with similar regulatory regimes. More currencies will follow.