What is Electronic Money: Everything You Need to Know

To fully appreciate the impact of Electronic Money, we need to define how it operates. 

Digital or electronic money, as defined by the European Central Bank, is a monetary value stored digitally on a technical device. Unlike traditional money, it's not a physical entity but rather an electronic version of cash. 

It can be used to conduct transactions, pay for goods and services, and doesn't necessarily have to involve banks or traditional banking systems in its transactions. 

Electronic money operates via advanced technologies and networks. Stored on devices such as smartphones, computers, or specialized payment systems, it's exchanged digitally between parties. 

When a transaction occurs, the monetary value is transferred from one account to another, with all the associated information securely stored.

Without a doubt, the evidence is clear: electronic money is here to stay. The European Union has seen a dramatic surge in e-money transactions, from 2.1 billion in 2014 to 7.4 billion in 2021. 

This is part of a more significant trend sweeping the globe. Increasingly, people are turning away from cash and embracing digital payments for convenience. We're well on our way to becoming an entirely cashless society!

An eMoney License, also known as an Electronic Money Institution (EMI) license, is a regulatory approval granted to businesses providing electronic money services. It ensures compliance with regulatory requirements, including capital adequacy, anti-money laundering measures, and risk management systems.

In Europe and Finland, obtaining an EMI license involves:

1. Preparation: Crafting a detailed business plan outlining your services.

2. Application: Submitting your plan, proof of capital, management details, and risk management strategies to the financial authority. In Finland, this authority is the Financial Supervisory Authority (FIN-FSA).

3. Evaluation: Undergoing a review period that can take several months.

4. Approval: Receiving the EMI license upon satisfying all requirements.

The world is rapidly hurtling towards digital finance, with electronic transactions and neo-banks gaining traction. 

But when will the money be wholly digitized?

While a precise timeline remains unclear due to varying levels of digital adoption across the globe, the International Monetary Fund (IMF) believes we are now in the experimentation phase with Central Bank Digital Currency (CBDC), indicating a potential shift towards largely electronic finance within several decades. 

Digital money and cryptocurrency, both forms of electronic currency, have key distinctions. Digital money mirrors existing fiat currencies and falls under financial authority regulations. Conversely, cryptocurrencies like Bitcoin are decentralized and unregulated by any central authority. 

The IMF suggests that carefully designed CBDCs could offer better durability, security, and lower costs than private digital money forms, including cryptocurrencies, making them potentially integral to the future digital money landscape.