Reykjavik-based Monerium has been given the green light by the Financial Supervisory Authority of Iceland (FME), making it the country’s first electronic money (e-money) institution.
While a regulatory framework for e-money payments has been in use for years, Sveinn Valfells, CEO and co-founder of Monerium, said that this will be the first time e-money has been approved for use on a blockchain.
According to Valfells, the fact that Monerium is working under an established framework is a big advantage for the company.
“For practical purposes, fiat will be the currency most people and institutions will want to use in the near- and medium-term,” he added. “And if you are touching fiat in any way, you just have to comply with the relevant regulations.”
He also noted that instead of designing the technology first and then seeking approval, which is what other companies making similar products tend to do, Monerium chose to build its tech based on currently-existing regulatory frameworks and rules.
“We believe law is also protocol,” he said.
More protection than banks
Monerium will, at first, operate on the ethereum blockchain, although the company has expressed an interest in operating across both public and private distributed ledgers. This would allow users to make expenditures and transfers without needing an intermediary.
“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,” said Monerium co-founder Jon Helgi Egilsson.
Egilsson explained that the EMI model, which is more conservative when it comes to deposits, provides consumers with more protection compared to banks, which typically make money by turning deposits into loans for other consumers.
“Unlike bank deposits, an electronic institution (EMI) must safeguard clients funds separately from any other financial activities, such as lending,” he said.
”Instead, customer funds are invested in a segregated portfolio of high-quality liquid instruments along with regulatory minimum reserves. The structure is similar to a high-grade money market fund.”
Monerium also claims that putting e-money on the blockchain will allow for cross-border payments that do not require a financial intermediary.
The company will start with Icelandic krona (ISK), which will be made usable throughout the EU once it goes live. The currency should then become usable shortly in other parts of the world that have similar regulatory frameworks.
Monerium is still in closed beta, and once ISK is live the company plans to add support for more currencies. Valfells said that the company’s earliest partners will gain access to e-money ISK in a matter of days, with a wider release estimated to occur as early as Q4 2019.