E-Money Institution and E-Money Agent Under the ZAG

E-money is a special form of money that is regulated by law. The regulatory classification of e-money, its issuance, and its commercial handling were regulated by the European legislator in the second E-Money Directive 2009/110/EC (EMD2), the provisions of which were implemented by the German legislator in the German Payment Services Supervision Act (ZAG) due to its thematic proximity to payment services. According to Section 1 (2) sentence 3 ZAG, e-money is any electronically or magnetically stored monetary value in the form of a claim against the issuer, which is issued against payment of a sum of money in order to make payment transactions and which is also accepted by natural or legal persons other than the issuer. The issuance of e-money is permitted exclusively to fully licensed credit institutions or e-money institutions licensed under Section 11 (1) ZAG. The regulatory requirements for the issuance of e-money are therefore very high. Companies that are not full-service banks or e-money institutions may only participate in the distribution and redemption of e-money as independent traders if they are e-money agents of an e-money issuer and act in this capacity on behalf of the e-money issuer. The status of e-money agent, like authorization as an e-money institution, must be reported to the competent supervisory authority and is also entered in a public register maintained by the European Banking Authority (EBA).

Authorized Activities for Electronic Money Institutions

A license to conduct e-money business does not exclusively entitle the institution to issue e-money. Rather, electronic money institutions may also engage in deposit-taking activities within narrow limits, namely to the extent that the funds received are immediately converted into electronic money of the institution and no interest is paid on the funds received. If these conditions are met, the funds received are not considered deposits within the meaning of Section 1 (1) sentence 1 of the German Banking Act (KWG). E-money institutions are also permitted under Section 3 (3) ZAG to maintain payment accounts for their customers, provided that these are used exclusively for the settlement of payment transactions in connection with the e-money business. In addition, since the Markets in Crypto Assets Regulation (EU) 2023/1114 (MiCAR), e-money institutions may also issue e-money tokens within the meaning of Art. 3 (1) No. 7 MiCAR (EMT), as EMT are considered e-money within the meaning of EMD2 pursuant to Art. 48 (2) MiCAR. However, caution is advised with regard to custody or transfer services that may be associated with the issuance of EMT. As the EBA clarified in a “no-action letter” dated June 2025, e-money institutions also require authorization as providers of crypto-asset services pursuant to Art. 59 et seq. MiCAR in order to perform corresponding activities in relation to EMT. The alternative is to involve a duly authorized crypto-asset service provider in the e-money institution’s business for the provision of crypto-asset services.

Requirements for Authorization Under Section 11 (1) ZAG for E-Money Institutions

Anyone wishing to apply to BaFin for a license as an e-money institution must meet strict requirements. First, the applicant company must have at least two managers who are professionally qualified and reliable and who have sufficient time available to manage the business of the future institution. In addition, the shareholders of the future e-money institution must also be reliable if they hold ten percent or more of the shares in the company. The minimum regulatory capital is €350,000 at all times. The specific own funds to be held are calculated in accordance with the provisions of the ZAG Equity Capital Regulation (ZIEV). BaFin imposes particularly high requirements on internal compliance with regard to IT security. The requirements of the EU Digital Operational Resilience Act (EU) 2022/2554 (DORA) must be fully met. In addition, applicant companies must submit a detailed and viable business plan for the first three full financial years that provides a reliable forecast of the future e-money institution’s success. In addition to other necessary documents, the customer contracts, general terms and conditions, and other documentation intended for the future provision of e-money services must also be made available to BaFin for review. Applying for authorization as an e-money institution is therefore a highly complex project that must be accompanied by professional advisors in all cases.

The lawyer responsible for preparing license applications for e-money institutions and providing general advice on e-money business at our law firm is Attorney Dr. Lutz Auffenberg, LL.M. (London).