The Financial Regulatory Authority of Iceland (FME) just registered Monerium, a Reykjavik based startup, as one of the first electronic money providers in Iceland. The firm is the first company in Europe that has been allowed to offer e-money services to the people. The news was announced by the Financial Supervisory Authority on its website and is believed be a direct competition to Facebook‘s stable coin dubbed as the Global Coin, which aims to provide similar services.
The company has been awarded an operating license which according to Act no. 17/2013 of the Icelandic law, gives the company the right to issue electronic money and offer related services. The license also gives the company right to operate in the European economic areas, thus making it the first electric money institution in the EU.
One advantage that Monerium has over Facebook’s GlobalCoin is that the regulatory approval for Monerium’s fiat already exists in Europe. While Facebook might secure regulatory approval in the United States easily, approval from the EU might become tough. The consortium CENTRE, backed by crypto giant Coinbase, is also aiming to allow member states to release their fiat currencies and might become a direct competitor for Monerium in its proposed form.
In an interview, the CEO of Monerium explained that the regulatory framework for e-money has always been there in the EU; however, the previous technologies were not based on a blockchain network. Monerium’s e-money platform will work exclusively on a blockchain. CEO Sveinn Valfells says that the established framework gives the company a competitive advantage. He added:
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 have to comply with the relevant regulations.
Monerium’s Co-founder Jon H Egilsson, who is also the former chairman of the Supervisory Board of the Icelandic Central Bank, launched the e-money platform in a digital currency conference in Stockholm on 15th June. Monerium will initially start on the Ethereum blockchain; however, the company plans to operate across different public and private blockchain networks in the future. This would help the company in decreasing transfer expenditure while making payments by reducing intermediaries in the process. Egilsson in a statement praising Monerium’s functionality 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.
Electronic money is a secure way to store monetary value on digital devices; the money can be used to buy things and can be transferred directly between digital hardware. The idea of electronic money institutions spawned in the wake of the financial crisis in 2009. Initially, the idea was to encourage people to put their money in banks but the system is now being used primarily for debit cards.
Egilsson believes that Monerium has followed protocol to create a necessity. Many startups that are creating blockchain based cryptocurrencies and stable coins are doing so in hopes of regulations that may or may not come. However, the regulations needed by Monerium are already there, and they work. Egilsson 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 minimum regulatory reserves. The structure is similar to a high-grade money market fund.
One of the key differentiation points of Monerium’s e-money project is that it is based on blockchain which makes it ideal for cross-border payments, thus making it usable throughout Europe. The company aims to back the e-money with the Icelandic Krona and once live, the currency would be usable in all parts of the world that follow the EU’s financial laws and regulations. The company plans to expand in other regions as well after it gets regulatory approval to operate in those areas.
However, registration on Monerium would also require all EU laws to be followed, and the company would need to implement anti-money laundering and know-your-customer measures to launch the electronic token in the EU.
Monerium is still a closed beta being used currently for internal testing. It is not yet clear how soon it will launch. However, the CEO of the company is confident that the e-money institution will officially launch by the fourth quarter of 2019.