Technological advancements impact many areas of our lives. Innovations are also emerging in financial services, and they even have their own name: fintech. Sometimes, consumers and even entrepreneurs use a given service without considering its actual purpose. In today's post, we'll examine the institution of electronic money.

What is electronic money?

The legal definition of electronic money can be found in Article 2, Section 21a of the Act of 19 August 2011 on Payment Services. Under this Act, electronic money is:

"monetary value stored electronically, including magnetically, issued, with the obligation to redeem it, for the purpose of making payment transactions, accepted by entities other than the sole issuer of electronic money."

Features of electronic money:

• has a certain monetary value,
• is stored electronically (also magnetically),
• is issued by entities that have obtained permission to conduct this type of activity,
• is also accepted by entities other than the electronic money issuer.

In short, it can be said that it is money stored on electronic information carriers, such as a payment card or a smartphone application, which can be issued not only by banks but also by electronic money institutions.

The most popular medium is the so-called prepaid card. These cards can be topped up from any source, and the transferred funds are recorded as electronic pulses.

Electronic money and cashless money

Many people mistakenly confuse electronic money with cashless money (also known as bank money). However, these are two different institutions.

In the case of the former, funds are stored electronically, are not linked to a bank account, and are secured using cryptographic methods. In the case of electronic money, there are no intermediaries involved in executing transactions; they take place solely between the two entities involved.

When using a debit/credit card, funds are transferred between two bank accounts through the bank's involvement, and the transaction is recorded in the account history. Without bank authorization, the transfer would not be possible.

Taking into account the above distinction, we speak of electronic transactions and cashless transactions, respectively.

Can you remain anonymous when using electronic money?

Under the current wording of Article 38 of the Act of 1 March 2018 on Counteracting Money Laundering and Terrorist Financing, there is no need to identify the customer or verify their identity if the maximum amount stored electronically and the monthly payment transaction limit do not exceed €50. Therefore, anonymity is possible up to an amount specified by law. Importantly, this limit will soon change due to an amendment to the law, which will be €150 from 31 October 2021.

This alert is for informational purposes only and does not constitute legal advice.

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