![]() A stablecoin’s value is indeed backed by one or multiple assets, some of which can be fiat currencies. E-MoneyĪ relatively new form of cryptocurrency – Stablecoins – throws a bridge to electronic money. Cryptocurrency’s worth is fluctuating, as determined by supply, demand and developments of the crypto market. Thus in contrast to e-money, whose fluctuation in value is tied to the assigned fiat currency’s value. A decentralized complex peer system validates and processes crypto transactions.įurthermore, classic cryptocurrencies are not backed by fiat money. Cryptocurrencies, as a relatively new technology, are not yet widely regulated. E-money institutions must comply with anti-money laundering, anti-fraud and know-your-customer regulations or face legal consequences. In “classic” electronic money transactions you have a financial institution acting as an intermediary supervising it. In opposition to electronic money, cryptocurrencies are not governed by a centralized authority. There are also goods and service providers who accept them as payment.īut that’s where the similarities end. Like electronic money, they have a worth which can change with the ebb and flow of the market. All these unique variations of digital currency have qualities and applications that differentiate them from e-money. The label e-currency also applies to cryptocurrencies, specific tokens like ICOs or virtual currencies like video game monetization currencies. Yet, those two terms cannot be used synonymously. The Difference Between Electronic Money and Other Digital CurrenciesĮlectronic money, as represented by the digital values stored and transferred online, is an e-currency. This makes it more likely for said “natural and legal persons” to accept e-money payments. This means that all electronic money in circulation derives from fiat money. The issuer only gives out e-money “on the receipt of funds”. In the case of e-money, this trust is backed by stable, well-accepted assets. So, like all money in our centralized financial system, electronic money maintains its value through trust. “ 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, and which is accepted by a natural or legal person other than the electronic money issuer“ European Central Bank 2020, Electronic Money, accessed 23 October 2020,Į-money, following this definition, is a stored value which generates a claim once it is issued. It contains the following definition of e-money: In 2009, the Commission brought a revised version of this directive into force, now referred to as the EMD2. ![]() This directive was put in place by the European Commission to create a cohesive rulebook for electronic money, including practices for security, risk-aversion, licensing and onboarding of new companies willing to position themselves on the electronic money market. In the EU, all handling of fiat-backed electronic money – from payment to obtaining an e-money license to supervising e-money institutions – falls under the purview of the EMD (Electronic Money Directive). The official definition comes with a few more layers of meaning, which set electronic money apart from other forms of digital and manifest value. That’s just the basic definition, of course. In both cases, we call such devices storing e-money electronic wallets or e-wallets ( check this article for a full explanation of those). The device in question could be software (like a banking system, or a payment service provider such as PayPal) or a piece of hardware like a smartphone or a magnetic device such as a prepaid card. E-money is defined as a digital, monetary medium of exchange that is represented on an electronic device.
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