EMI Requalification: What Firms Should Do Next

The debate over what actually counts as electronic money is no longer academic. As the European Banking Authority (EBA) and national competent authorities work towards a common interpretation, many electronic money institutions (EMIs) may need to reassess whether parts of their business truly constitute e-money issuance — or whether they are, in substance, payment services under PSD2.

The Bank of Lithuania has been clear that this exercise should not be viewed as a new licensing round. Instead, institutions should prepare for a product-by-product assessment of their activities and, where necessary, adapt their governance, documentation, capital methodology and regulatory reporting.

The Guiding Principle: Same Function, Same Authorisation

The Bank of Lithuania has summarised its emerging supervisory philosophy in a simple formula: “same function = same authorisation”.

In practice, this means that the legal qualification of a product should follow its economic substance, not the historical licence held by the institution or the label used in contractual documentation. An activity that functionally operates as a payment service should be authorised and supervised as such — even if it has historically sat within an EMI licence.

Requalification Begins with the Business Model

The first step is understanding how individual products actually operate.

The Bank of Lithuania expects institutions to carry out their own initial assessment and determine which activities meet the characteristics of electronic money issuance and which should instead be treated as payment services under PSD2. Rather than publishing a fixed checklist, the Bank intends to issue practical guidance once a common European position has been reached, with individual business models continuing to be assessed on a case-by-case basis.

This approach follows EU case law. In ABC Projektai (Case C-661/22), the Court of Justice of the EU held that receiving funds without an accompanying payment order and simply holding them available on a payment account is a payment service, not e-money issuance. E-money, the Court confirmed, must be a monetary asset that is genuinely “stored” and distinct from the funds received.

This reading is reinforced by EBA Q&A 2022_6336, which concluded that the “acceptance by third parties” limb of the e-money definition is not satisfied where a payee simply receives ordinary (scriptural) money on redemption. Acceptance requires the payee to accept and receive e-money itself, as a distinct asset, under a direct contractual arrangement.

A practical illustration can be found in marketplace models such as Vinted (through Vinted Pay) in Lithuania, where users may hold value in an electronic money wallet and use that balance to pay other users on the platform. In such cases, third-party acceptance may arise because merchants accept the stored electronic money itself, rather than ordinary funds transferred after redemption.

A common EU-wide interpretation has not yet been reached, however, and the Bank of Lithuania has openly acknowledged that comparable business models are currently qualified differently in different jurisdictions.

Capital Requirements May Need to Change

One of the most significant consequences of requalification concerns regulatory capital.

Separately from the qualification question itself, the CJEU’s earlier judgment in Paysera LT (C-389/17) clarified how regulatory capital should be calculated where an EMI provides both e-money issuance and payment services.

• Activities linked to the issuance of electronic money remain subject to Method D under Article 5(3) EMD2.
• Payment services that are not linked to e-money issuance must be calculated under Methods A, B or C pursuant to PSD2.
• The Court held that a payment service is regarded as linked to the issuance of electronic money where it triggers the issuance or redemption of electronic money in a single payment transaction.

Read together, ABC Projektai determines whether an activity constitutes e-money issuance or a payment service, while Paysera LT determines which prudential capital methodology applies once that classification has been made. Where an institution provides both types of services, separate capital calculations may become necessary.

The Bank of Lithuania indicates that institutions may need to review their capital calculation methodologies as part of the requalification process. Importantly, the Bank also confirms that no new investment limits, mandatory allocations between central and commercial bank accounts, or new liquidity ratios are currently planned solely as a consequence of requalification.

The MiCA Carve-Out: E-Money Tokens Remain E-Money

One category is not affected by the broader requalification debate: e-money tokens (EMTs) under the MiCA Regulation.

The Bank of Lithuania confirms that:

• EMTs continue to be treated as electronic money under Article 48 of MiCA.
• Institutions issuing EMTs will remain EMIs and continue to apply the EMI regulatory regime.
• Method D continues to apply to capital calculations for EMT-related activity.

However, this does not mean that every other service offered by an EMT issuer is automatically e-money issuance. A hybrid outcome is possible: one part of the business may qualify as e-money issuance (including EMT issuance), while another may qualify as payment services. Each product line must be assessed on its own merits.

The Bank also notes that EMT distribution models under MiCA differ meaningfully from traditional e-money distributor arrangements. CASP-based distribution, for example, does not necessarily map onto the classic e-money distributor concept.

Customer Documentation Should Reflect the Actual Service

Requalification is not limited to prudential supervision.

If the legal nature of a product changes, institutions may also need to update customer-facing documentation. According to the Bank of Lithuania, firms should be prepared to review customer agreements, internal procedures, reporting processes and related documentation where necessary.

The EBA’s proposed implementation steps go in the same direction, requiring institutions to ensure that customer contracts, pre-contractual information and marketing materials accurately describe the services being provided.

Distributor or Agent?

Another important consequence concerns distribution models.

Historically, many EMIs relied on electronic money distributors. Where a business model is reclassified as payment services, those relationships may instead fall within the PSD2 agent regime under Article 19.

The Bank of Lithuania emphasises that qualification depends on the functions actually performed, not on contractual labels. Particular attention should be given to whether a partner:

• receives customer funds;
• participates in the execution of payment transactions;
• influences customer interactions or servicing; or
• otherwise performs payment service functions.

Where these elements are present, the partner may need to be treated as an agent, regardless of the terminology used in contracts. The Bank does not intend to publish an exhaustive list of permitted distributor functions, but practical examples and explanations are expected to accompany future guidance.

Institutions should therefore review existing partner arrangements as part of any requalification assessment.

Passporting May Also Require Review

The Bank of Lithuania does not expect institutions to repeat the entire passporting process.

However, where existing notifications refer to electronic money issuance that is subsequently reclassified as payment services, those notifications will need to be updated. Similar considerations arise if distributors are reclassified as agents, in which case additional notifications to host-state authorities may be required.

The exercise is expected to focus on updating existing regulatory information rather than obtaining entirely new authorisations.

No Immediate Changes to Safeguarding

One area where the Bank of Lithuania does not anticipate significant change is safeguarding.

The fundamental principles governing the protection of customer funds derive from the same regulatory framework and remain broadly consistent for both payment institutions and electronic money institutions. As a result, no material changes to fund segregation, safeguarding, investment or liquidity rules are currently expected solely because of requalification. More substantial reforms, if any, are likely to arise in the context of PSD3.

Governance and Compliance Focus Areas

The Bank of Lithuania highlights the following areas as priorities during the transition:

• capital management and the recalibration of capital calculation methodologies;
• risk management frameworks;
• customer contract reviews;
• customer disclosure and information processes;
• regulatory and statistical reporting processes;
• partner and agent model assessments; and
• updating internal policies and procedures connected to all of the above.

The Bank also emphasises the importance of proper change management during the transitional period — including thorough documentation of the analysis performed and the decisions taken.

EBA’s Expected Implementation Steps

Although discussions continue at European level, the EBA has identified several areas that institutions should prepare to address, with the following indicative timeline:

• By 31 December 2026 — review own funds calculations to ensure the correct prudential methodology is applied (taking into account Paysera LT).
• By 30 March 2027 — assess whether distributors should be registered as agents under Article 19 PSD2.
• By 30 March 2027 — update passport notifications where necessary.
• By 30 March 2027 — review customer documentation, pre-contractual information and marketing materials.
• By 30 June 2027 — ensure regulatory reporting reflects the correct qualification of activities, including retroactive corrections to fraud and transaction reporting under Article 96 PSD2 where applicable.

These measures are intended to support consistent supervisory treatment across the EU rather than create new categories of regulated activity. National competent authorities have in turn urged the EBA to take a more coordinated role in supporting implementation — similar to the EBA’s No-Action Letter approach on the MiCA/PSD2 interplay — given industry pushback and legal uncertainty over the binding status of the underlying Q&A guidance.

The Bank of Lithuania’s Transitional Approach

Unlike an immediate enforcement exercise, the Bank of Lithuania has adopted a gradual supervisory approach.

The Bank states that it does not intend to begin a formal requalification process or impose additional requirements before a common European interpretation has been agreed with the EBA and other national authorities. Once that position is finalised, the Bank plans to issue detailed guidance and continue consulting institutions on individual business models.

The Bank does not currently expect firms to restate historical statistical or fraud reporting data, with any new classification expected to apply prospectively. Institutions should note, however, that the EBA’s own implementation steps reference retroactive corrections as a possible requirement in some cases, so this point may be clarified further once a common EU position is reached.

Preparing for PSD3

The Bank of Lithuania has emphasised that requalification should not be viewed in isolation.

The current discussion forms part of the broader transition towards PSD3, which is expected to reshape the regulatory framework for payment institutions and electronic money institutions across the European Union — including a likely new authorisation cycle for the entire market. For that reason, firms should regard today’s assessment exercise not as a one-off compliance project, but as preparation for a wider evolution in European payments regulation.

How Ecovis ProventusLaw Can Help

Requalification is a rare kind of regulatory exercise: it does not require a new licence, but it does require an institution to look critically at how its business actually operates, product-by-product, contract-by-contract, and reporting line by reporting line. That is exactly the type of work our team has been doing with EMIs, PIs and CASPs in Lithuania and across the EU since 2014.

Ecovis ProventusLaw supports payment and electronic money institutions through the full requalification lifecycle:

• Product-by-product qualification analysis, mapping each service against the EMD2 definition, PSD2 payment services 1–8, the ABC Projektai judgment and EBA Q&A 2022_6336, and preparing a defensible written legal analysis for supervisory dialogue.
• Capital methodology review, assessing whether Method A, B, C or D applies to each activity in light of Paysera LT, including hybrid EMI/PI setups and EMT issuers under MiCA.
• Distributor vs. agent assessments, reviewing existing partner arrangements against Article 19 PSD2 criteria and re-papering contracts where reclassification is required.
• Passport notification updates, coordinating with the Bank of Lithuania and host-state authorities to update existing PSD2/EMD2 notifications efficiently, without triggering unnecessary re-authorisation.
• Customer documentation redraft, updating framework agreements, pre-contractual disclosures, terms of service and marketing materials to reflect the actual regulatory nature of the services.
• Governance, internal policies and reporting, aligning risk management, safeguarding arrangements, transaction and fraud reporting, and internal procedures with the reclassified perimeter.
• Regulatory dialogue and representation, engaging directly with the Bank of Lithuania on individual cases, and representing clients in Fintech Hub LT industry consultations on the requalification and PSD3 agenda.
• PSD3 readiness, building the requalification exercise into a broader roadmap so that clients are not doing the same work twice when PSD3 introduces its own transitional regime.

With one of the most experienced fintech regulatory teams in the Baltics, deep working relationships with the Bank of Lithuania, and cross-border coverage through the Ecovis network in more than 90 countries, we help EMIs turn a potentially disruptive supervisory exercise into a structured, well-documented transition — and into an opportunity to prepare early for PSD3.

If your institution is beginning its requalification assessment, or would like a second opinion on an internal analysis already underway, our team is available to help.