Electronic money be defined as amount of money value represented by a claim issued on a prepaid basis, stored in an electronic medium (card or computer) and accepted as a means of payment by undertakings other than the issuer” (ECB). Electronic money is a monetary value that is stored and transferred electronically through a variety of means - a mobile phone, tablet, contactless card (or smart cards), computer hard drive or servers. Electronic money need not necessarily involve bank accounts in transaction but acts as a prepaid bearer instrument. They are often used to execute small value transactions. Electronic money can be stored in hardware a chip card or software usually stored in a server. An access card like credit card or debit card that simply enables us to reach our deposit or to avail a credit doesn’t qualify as electronic money

1. Expert Mission on Electronic money
Electronic money as virtual currency – analysis
Adam Janiszewski
TAIEX mission in Baku 5-7 May 2015
1
Electronic money

2. Virtual currencies – definition (1)
 “a type of unregulated, digital money, which is issued and
usually controlled by its developers, and used and accepted
among the members of a specific virtual community” (2012,
European Central Bank)
 “a digital representation of value that is neither issued by a
central bank or a public authority, nor necessarily attached to a
fiat currency, but is accepted by natural or legal persons as a
means of payment and can be transferred, stored or traded
electronically” (2014, EBA Opinion on ‘Virtual Currencies’).
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3. Virtual currencies – definition (2)
Description of virtual Electronic money:
 lack of legal definition in EU law,
 virtual (non-material) state of currency,
 control by issuer/lack of control of the issuer,
 lack of value basis in economic indicators,
 as principle – used outside the banking clearing system,
 used on closed virtual society (principle) or in real life,
 speculative or trade purpose of possession of virtual currency.
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4. The most popular virtual Electronic money
 More than 500 virtual currencies - Total Market Cap: $ 3,791,769,066
(on 23/04/2015),
 VC – traded on more than 1700 markets,
 Actual list of virtual Currencies on: www.coinmarketcap.com,
 Bitcoin – the most popular ($ 3,318,619,078) (on 23/04/2015),
 Remaining top 10 (Total Market Cap) : Ripple ($ 253,513,761), Litecoin
($ 54,783,608), Dash ($ 18,106,371), Stellar ($ 12,985,828), BitShares
($ 11,533,256), MaidSafeCoin ($ 10,572,122), Dogecoin ($ 10,567,975),
Nxt ($ 9,581,862), BanxShares ($ 7,096,779), Peercoin ($ 5,342,045).
4Electronic money

5. Basic information about Bitcoin (1)
• Btlcoin token - invented by Satoshi Nakamoto in (2009)
• First decentralized digital currency (the system works without a
central repository or single administrator) – open source code.
• The system is peer-to-peer based model.
• Transactions are verified by network nodes and recorded in a
public distributed ledger called the ”block chain”.
• Small multiples of bitcoin used as alternative units are millibitcoin
(mBTC), microbitcoin (µBTC), and satoshi (the smallest multiple
of bitcoin representing 0.00000001 bitcoin, which is one hundred
millionth of a bitcoin).
5Electronic money

6. Basic information about Btlcoin token (2)
• Limit of Btlcoin token (21 million).
• Supply growth - 25 Btlcoin token per block (approximately every
ten minutes) until mid 2016, and then afterwards 12.5 bitcoins per
block for 4 years until next halving. This halving continues until
2110-2140 when 21 million bitcoins have been issued.
• Mining Btlcoin token – mining pools (special IT device).
• Mining – “proof of work” – new block in block chain.
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7. Basic information about Btlcoin token (3)
• Transaction – Public key, private key – bitcoin digital wallet.
• Criminal activity: black market, money laundering, financial
pyramid?
• Security – attacks on the electronic platforms trading Btlcoin
token.
• Legal status in the UE Member States and in the third countries.
7Electronic money

8. Is Btlcoin token the electronic money? (1)
 EMD – definition – ‘electronic money’ means electronically, including
magnetically, stored monetary value as represented by a claim on the issuer
which is issued on receipt of funds for the purpose of making payment
transactions as defined in point 5 of Article 4 of Directive 2007/64/EC, and
which is accepted by a natural or legal person other than the electronic money
issuer;
 Art. 11(2) of the EMD - Member States shall ensure that, upon request by the
electronic money holder, electronic money issuers redeem, at any moment and at
par value, the monetary value of the electronic money held.
 Art. 11(3) of the EMD - the contract between the electronic money issuer and the
electronic money holder shall clearly and prominently state the conditions of
redemption, including any fees relating thereto, and the electronic money holder
shall be informed of those conditions before being bound by any contract or
offer.
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9. Is Btlcoin token the electronic money? (2)
 Btlcoin token is not issued by a single entity (issuer) – it is
created by the system diffused over the word,
 Btlcoin token is not issued on receipt of funds – it is
“excavated”,
 There is no requirement to redeem the Btlcoin token.
 In line with Polish legislation (Foreign Exchange law) Btlcoin
token and other virtual currencies is not a legal tender in
Poland.
9Electronic money

10. Is trading the Btlcoin token a Electronic money service under the PSD? (1)
 PSD - ‘payment account’ means an account held in the name of one or more
payment service users which is used for the execution of payment transactions;
 PSD - ‘payment transaction’ means an act, initiated by the payer or by the payee,
of placing, transferring or withdrawing funds, irrespective of any underlying
obligations between the payer and the payee;
 PSD - ‘payment order’ means any instruction by a payer or payee to his payment
service provider requesting the execution of a payment transaction;
 PSD - ‘payment instrument’ means any personalized device(s) and/ or set of
procedures agreed between the payment service user and the payment service
provider and used by the payment service user in order to initiate a payment
order.
 PSD - ‘funds’ means banknotes and coins, scriptural money and electronic
money as defined in EMD.
10Electronic money

11. Is trading the Btlcoin token a payment service under the PSD?
(2)
 Btlcoin token Wallet is not payment account – there is no service
provider who runs the account and accepts payment orders (no
contractual relation between provider and user) – trade of Bitcoins is
based on rule P2P.
 Transfer of Btlcoin token is not a payment transaction within the
meaning of the PSD – there is no provider who places Bitcoin on the
account, transfer it or withdraw it from the Bitcoin Wallet.
 Public key of Btlcoin token is not payment instrument within the PSD
– no provider to authorize transaction and to accept an order to initiate
transaction.
 Bitcoin is not covered by definition of “funds” under PSD.
11Electronic money

12. European Banking Authority on virtual currencies
EBA/WRG/2013/01 (12 December 2013) “Warning to consumers on
virtual currencies”
The EBA has identified several characteristics and risks that you should be
aware of when buying, holding, or trading virtual currencies:
 possibility to lose your money on the exchange platform,
 possibility that virtual money may be stolen from digital wallet,
 user is not protected when using virtual currencies as a means of payment,
 the value of virtual currency can change quickly, and could even drop to zero,
 transactions in virtual currency may be misused for criminal activities, including
money laundering.
 Trade of virtual currencies may be subject to tax liabilities.
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13. Conclusions
 Virtual Currencies create their own settlement units (own name of
currency).
 Virtual currencies are usually accepted in virtual societies (games) but
may be also accepted and subject to speculative trade in real life.
 Virtual currencies are not legally regulated on EU level (nor national).
 As a principle - the issuer of the Virtual Currency (if there is one) is not
financial institution regulated by EU legislation and subject to financial
supervision.
 There is not state guarantee for lost of virtual currency.
 Increase of volume of turnover of Virtual Currency and increase of its
presence in real life will enhance the EU or national Regulator to
establish the legal frames for Virtual Currencies.
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