Draft Regulating ‘Electronic Money’ Prepared in Romania

2018-7-7 05:25

A draft ordinance aiming to regulate the issuance of “electronic money” has been presented in Romania. The document authored by the Finance Ministry specifies the entities that can act as issuers and clarifies the conditions under which e-money can be emitted. While it does not specifically mention cryptocurrencies, some of its definitions and provisions can affect digital coins and tokens.

Also read: Presidential Decree Sets the Stage for Legalizing Cryptocurrencies in Uzbekistan

Emergency Ordinance Aims to Regulate E-Money

The draft regulation released in Romania introduces definitions and rules regarding the issuing of what it refers to as “electronic money.” The “emergency ordinance”, published by the Ministry of Finance, proposes certain requirements for the issuers and tasks the Romanian National Bank (RNB) with the oversight of the process. The central bank will also be responsible for authorizing the issuing entities.

The document describes electronic money as “monetary value stored electronically, including magnetic, representing a claim on the issuer issued on receipt of funds for the purpose of performing payment transactions and which is accepted by a person other than the issuer of electronic money,” Business Review reported. The description covers some aspects of cryptocurrencies and can potentially influence the status of digital tokens minted through initial coin offerings, although these have not been mentioned explicitly.

According to the draft text, any legal entity considering the issuance of electronic money must have a share capital of at least €350,000 EUR. Each member of a given organization should also be verified and approved by the central bank in Bucharest which will check the tax and legal records. The financial institution will issue authorizations valid for a period of 12 months. The companies will have to perform annual audits and file reports with the RNB.

The Finance Ministry has also listed several types of organizations that can emit electronic money. These include credit institutions, other entities authorized as issuers and providers of postal services issuing electronic money under the applicable national and European law, when they do not act as monetary authorities or exercise public authority.

Romanian Central Bank to Authorize Issuers

The National Bank of Romania will grant authorizations after reviewing each application within three months of its filing. It will authorize only entities that are able to prove they have established prudent and sound management, carefully designed electronic money issuance process, clear organizational structure with well-defined responsibilities and effective procedures to monitor and manage risks.

The central bank will have the power to cancel any authorization if the respective entity is not issuing electronic money on the territory of Romania or does not start doing so within 12 months after receiving permission. Authorizations would be withdrawn if they were obtained on the basis of false information or through illegal means. The same will happen if an e-money issuer no longer meets the requirements of the regulation or if its activity endangers the stability of the country’s payment system.

Last but not least, the ministry warns that the unauthorized issuing of electronic money is punishable by Romanian law, either by imprisonment of up to 3 years or by fine. Only three entities are currently emitting digital currencies in the country – Capital Financial Services SA, Vodafone Romania M-Payments Ltd. and Orange Money Ltd.

Cryptocurrencies Deemed a Security Problem

The e-money regulations have been proposed just weeks after the governor of the National Bank of Romania, Mugur Isarescu, made a statement against cryptocurrencies. Last month, he said it was hard to believe they could become actual money as they were unable to fulfil the basic functions of fiat currencies. In his opinion, the biggest problem with cryptocurrencies is the lack of a trusted issuer: “It’s not clear who the issuer is. From this perspective, it’s even a security problem.”

Isarescu added that cryptocurrencies could hardly be a means of exchange, noting the limited number of transactions and the insignificant number of retailers accepting bitcoin. The banker explained that the payments with virtual currencies take more time and cost more than the existing payment options. However, like many of his colleagues around the world, the governor suggested that the technology behind cryptos, blockchain, should be explored.

In February, BNR said it classifies digital currencies like bitcoin as volatile and risky speculative assets, stating that it discourages any involvement with them. The warning was also addressed to the country’s legacy financial institutions which were advised against providing services to entities investing or transacting in cryptocurrencies. In May, the oldest Romanian crypto trading platform, Btcxchange, shut down after Idea Bank closed its bank account in January.

Bitcoin, however, has been gaining popularity in Romania over the past years. A poll conducted in March found that more than half of Romanians living in the cities know about cryptocurrencies and half of the respondents under the age of 40 want to use them to pay for goods and services. According to local media, at least six crypto ATMs are currently operational in the country, most of them are located in the capital Bucharest.

Do you expect Romania to legalize cryptocurrencies and regulate coin offerings? Tell us in the comments section below.

Images courtesy of Shutterstock.

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