Iceland’s Fiat Currency Now the ‘First Fiat to Be Traded as E-Currency’

Approval sought for Reykjavik-based Monerium for Iceland’s first electronic money institution has been given by the Financial Supervisory Authority of Iceland (FME). As announced on Friday, June 15 the designation implies that Monerium has approval from the regulators to provide fiat payment services on a blockchain and use it throughout the European Economic Area.

Electronic money is fiat held and transferred digitally. Over the years in Europe Electronic money has been a well-established regulatory framework that’s been in use, CEO and co-founder of Monerium, Sveinn Valfells explained to in an over-the-phone interview. This, however, happens to be a first when it comes to approving electronic money for use over a blockchain.

Valfells backed this first of its kind, unique innovation with an argument that many companies making products that are similar, such as fiat-backed stablecoins, designed technology first and looked for regulators to approve it. Instead of the norm, Monerium decided to base its technology on an existing set of rules. Valfells said: “We believe law is also protocol.” Working under an established framework is seen as a competitive advantage for Monerium and this is an actual fact. Valfells said in addition: “For practical purposes, fiat will be the currency most people and institutions will want to use in the near- and medium-term. And if you are touching fiat in any way, you just have to comply with the relevant regulations.

The legal concept of an electronic money institution (EMI) has been in existence from the financial crisis, established in a 2009 act by the European Union. The rule is primarily used now for prepaid debit cards, Valfells explained. Co-founder of Monerium, Jon H. Egilsson was scheduled to further discuss the news in Stockholm on Saturday, June 16, at a digital currency conference. He shared a copy of his prepared remarks with CoinDesk in advance at the time, Egilsson wrote: “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.” Egilsson was formerly chairman of the Supervisory Board of the Icelandic Central Bank.

Additionally from Egilsson’s remarks,Unlike bank deposits, an electronic institution (EMI) must safeguard clients funds separately from any other financial activities, such as lending. 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.

On how electronic money works; Putting e-money on the blockchain enables a cross-border regulated form of payment without a financial intermediary. Like traditional financial institutions, customer deposits money but on the blockchain, the e-money would not be turned into loans for borrowers instead; EMIs are more conservative with deposits. Fiat put into an EMI must always be redeemable without conditions, providing customers with more protection.

According to plans recanted to press, they will start with Icelandic krona (ISK) and Monerium’s version of ISK to be usable throughout the EU once it goes live. Following shortly would be the availability for use in many other parts of the world with similar regulatory regimes. Monerium will avail an e-money ISK for its earliest partners in a matter of days, Valfells said as he estimated that the e-money ISK should become available to a wider audience as early as Q4 2019.

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Credits- Bradley Dale

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