Iceland’s Financial watchdog the Financial Supervisory Authority (FME) has issued a licence to Monerium, based in Reykjavik, to become its inaugural electronic currency institution.
The announcement was made on Friday which technically allows Monerium to offer fiat payment services using blockchain. The approval means that Monerium can use the licence within the European Economic Area. europe has a well formulated regulatory guidelines on the use of electronic money and has been used for many years.
Monerium co-founder and CEO, Sveinn Valfells, said that this will be the first time that electronic money will be used over the blockchain technology. He explained further:
“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.”
Jon Egilsson, Monerium co-founder, is set to divulge more details of the approval in a crypto conference that will be held in Stockholm, Sweden on Saturday 15, 2019. Egilsson is a former chair of Iceland Central Bank Supervisory board and is well versed with finance policies and regulations in the country and Europe.
Electronic Money and how it Works
Electronic money is fiat that is kept and transferred digitally. Monerium which is backed by ConsenSys, will first operate through ethereum blockchain. However, the company plans to operate using both public and private distributed ledgers which will allow users to transact without the need of an intermediary.
Sharing with CoinDesk, Egilsson gave a snippet of his awaited speech:
“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 idea about electronic money institution (EMI) was conceived during the last global financial crunch and established in 2009 by a European Union act. According to Valfells, the rule is currently being used for prepaid debit cards.
Valfells explained that firms coming up with similar products like fiat backed stablecoins, started with developing the technology and later seeking approval from various regulators. However, Monerium developed its technology based on the existing rules. The CEO explained that the team analyzed the law critically before development started.
Egilsson explained that EMIs make their money different from the traditional banking institutions. He explained:
“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.”
In this regard, the EMI model offers clients with enhanced protection as fiat committed to an EMI must be redeemable at all times without any conditions.
Through putting E-money on decentralized technology, it means that users will enjoy cross-border payments without using any intermediary. The firm will kick off the project with Icelandic krona (ISK) and when it goes live the Monerium’s form of ISK can be used within EU member countries.
The company will expand to other jurisdictions in the world that have similar regulatory frameworks and more currencies will follow. What’s your take on Monerium’s version of ISK? Will it be revolutionize the industry? Share with us in the comments section.
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