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Electronic money has entered Austrian law. The e-money Act regulating the issuance of e-money became effective as of April 2 2002. It is largely based on the EC Electronic Money Directive of September 2000.

What is e-money? What kind of business is covered by the Act? E-money is defined by the act as a monetary value that is stored on an electronic device and accepted as means of payment by undertakings other than the issuer. The issued amount is limited to €2,000 ($1,841). The scope of the Act thus covers, among other types of money, the widespread chip card.

Credit institutions that are authorized to receive deposits and grant credits were previously also authorized to issue e-money. The Act now introduces a more liberal supervisory regime for e-money institutions, that restricts their business activities to the issuance of e-money and the provision of closely-related services. They must not have any holdings in other undertakings, except where those undertakings perform functions related to e-money. Conversely, institutions performing other banking activities as well, or operating beyond the described limits, require at least an authorization for receiving deposits and granting credits and are subject to the entire regime of the Banking Act.

E-money institutions must have initial capital of at least €1 million. Funding requirements (2% of financial liabilities related to outstanding electronic money), limitations of investments, and obligations to communicate compliance data to the supervisory authority are less complex and burdensome than those applicable to credit institutions under the Banking Act.

Also the receipt of funds does not constitute a deposit if the funds are immediately exchanged for electronic money and no credit balance is left on account. Therefore e-money institutions are not subject to deposit-guarantee schemes and depositor protection. However, e-money institutions are subject to all other regulations of the Banking Act.

A bearer of e-money has the right to redeem it at par value in cash or by a transfer to an account free of charges other than those strictly necessary to carry out the operation. The contract between the issuer and the bearer must state the conditions of redemption and may stipulate a minimum threshold, which must not exceed €10.

E-money institutions authorized in a member state are granted freedom of establishment and freedom to provide services in Austria, except with regard to related services (the Directive does not provide mutual recognition for electronic money institutions' business activities other than the issuance of e-money). Conversely e-money institutions authorized in Austria may carry on their activities in other member states.

Credit institutions already authorized to issue e-money must apply for authorization under the E-money Act by July 31 2002. Otherwise the authorization expires. In the case of timely application, the authorization remains valid pending a decision by the supervisory authority.

Gerhard Rettenbacher

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