A small electronic money institution (small EMI or SEMI) is a category of firm under the United Kingdom's Electronic Money Regulations 2011 that is registered by the Financial Conduct Authority (FCA) to issue electronic money on a limited scale. It is not simply a smaller version of an authorized electronic money institution (EMI): it is a separate status with its own eligibility conditions, a cap on the amount of e-money it may have outstanding, lighter prudential requirements and no right to operate in other countries.
The category derives from an optional waiver in the European Union's second E-Money Directive (2009/110/EC), which let member states register smaller issuers under a lighter regime. The United Kingdom adopted it, and the status continued in UK law after Brexit.
Eligibility limits
To be registered and to remain a small EMI, a firm must meet size conditions set in the regulations. The central one is that its average outstanding electronic money must not exceed EUR 5 million. If the firm also provides payment services unrelated to issuing e-money, the monthly average of those payment transactions over the preceding 12 months must not exceed EUR 3 million, the same threshold that applies to a small payment institution. Its managers must meet standards of good repute and fitness, and its business must not be connected to money laundering or terrorist-financing convictions. A firm that exceeds the limits must apply for authorization as an EMI or reduce its activity.
Requirements
- Registration, not authorization: the application is simpler, and the FCA's assessment is less extensive, than for an authorized EMI.
- Capital: small EMIs face lighter regulatory capital requirements than authorized EMIs, which must hold initial capital of EUR 350,000 and ongoing own funds.
- Safeguarding: funds received in exchange for e-money must be protected under the safeguarding rules, usually in a safeguarding account. This obligation applies in full to small EMIs.
- Conduct rules: redemption at par, prohibitions on paying interest on e-money balances, and information requirements apply as for authorized EMIs.
- Financial crime: the firm is subject to the Money Laundering Regulations 2017 and must operate an AML program and apply know your customer checks.
Small EMI compared with an authorized EMI
The trade-off for lighter entry requirements is narrower scope. A small EMI's growth is capped by the outstanding e-money limit, so firms planning to scale usually treat the status as a stepping stone or avoid it. Before Brexit, a small EMI could not use passporting to provide services in other EEA states, whereas an authorized EMI could; post-Brexit, UK firms have lost passporting in any case, so the practical difference now lies in scale, capital and supervisory intensity. Banks and partners conducting due diligence often treat small EMIs as higher risk than authorized EMIs because of their thinner capital base, which can affect access to bank accounts and payment schemes.
Distribution and agents
Like other e-money issuers, a small EMI may distribute and redeem e-money through an e-money distributor, and where it provides payment services it may use an EMI agent, provided the agent is registered with the FCA. The small EMI remains responsible for the acts of its distributors and agents.
Context and comparison
The small EMI sits at the lower end of the UK's tiered system for non-bank payment firms, below the authorized EMI and alongside the small payment institution and the authorized payment institution. Similar tiering exists in some other jurisdictions under the optional EU waivers. In the United States, by contrast, there is no federal e-money license; prepaid and stored-value products are generally covered by state money transmitter licenses and by federal rules on prepaid access. E-money issued on blockchains in the EU is treated as e-money tokens under MiCA. For the supervisor, see the FCA regulator profile.