EMI license requirements 2026: complete UK and EU electronic money institution guide

The digital payments market continues to grow rapidly, with electronic money becoming a core part of modern financial infrastructure. More fintech companies are launching e-wallets, payment platforms, and digital financial services. However, operating in a regulated environment requires obtaining an EMI license. In the European Union and the United Kingdom, requirements for electronic money institutions are clearly defined under PSD2, EMD2, and the regulatory framework of the Financial Conduct Authority. In this article, we explain what an EMI license is, the key requirements for companies, and how the licensing process works in the UK and the EU.

What is an EMI license and who needs it

An EMI license (Electronic Money Institution) allows companies to issue electronic money and provide payment services without obtaining a full banking license. This status enables businesses to hold client funds, process payments, and offer digital wallets, with lower capital and regulatory requirements than banks.

It is important to note that EMIs cannot accept deposits or use client funds for lending. Their core function is issuing electronic money and supporting payment infrastructure. This makes the EMI license a popular solution for fintech businesses seeking to operate in a regulated environment without becoming a bank.

What is an electronic money institution

An electronic money institution is a licensed financial entity that issues electronic money, representing a digital equivalent of fiat currency. These funds are used for payments, transfers, and storage in digital wallets.

EMI regulation focuses on safeguarding client funds and ensuring operational transparency. In the EU, such companies operate under PSD2 and EMD2, while in the UK they are supervised by the Financial Conduct Authority.

Unlike banks, EMIs do not provide lending services but must protect client funds through safeguarding mechanisms.

Which businesses require an EMI license

An EMI license is required for companies dealing with electronic money and payment services.

Typical examples include:

• Digital wallets (e-wallets)
• Payment platforms and PSPs
• Prepaid card and prepaid solutions
• Fintech apps for transfers and fund storage
• Crypto-fiat projects (depending on the business model)

Obtaining an EMI license allows such companies to legally handle client funds, partner with banks, and operate in regulated markets.

Regulatory framework: UK vs EU

Regulation of EMI licenses in the European Union and the United Kingdom is based on similar principles, but important differences have emerged after Brexit. Companies choosing a licensing jurisdiction must consider not only capital and compliance requirements but also their ability to scale.

EU: PSD2 and EMD2

In the European Union, electronic money institutions are regulated by two key directives — PSD2 (Payment Services Directive) and EMD2 (Electronic Money Directive). These frameworks set requirements for licensing, safeguarding client funds, and providing payment services.

A major advantage of an EU EMI license is passporting, which allows a company licensed in one member state to offer services across all EEA countries without additional authorization.

Supervision is carried out by national regulators, while the European Banking Authority coordinates standards and guidance, creating a relatively unified regulatory environment.

UK: regulation by the FCA

In the United Kingdom, EMI licenses are issued and supervised by the Financial Conduct Authority. The core requirements are broadly aligned with EU rules, as the UK initially implemented PSD2 and EMD2.

However, after Brexit, UK firms no longer benefit from passporting rights in the EU. To operate in the European market, a separate license in an EU country is required.

At the same time, the UK remains an attractive jurisdiction due to:

• Clear and established regulatory practices
• Well-developed financial infrastructure
• Strong reputation among investors

As a result, the choice between the UK and EU depends on business strategy: the EU is better suited for pan-European scaling, while the UK offers a stable and well-developed standalone market.

Basic requirements for obtaining an EMI license

Obtaining an EMI license requires thorough preparation and compliance with a range of regulatory requirements. Regulators assess not only the company’s financial position but also its governance, business model, and compliance framework. Regardless of jurisdiction, the requirements are broadly similar and aimed at protecting clients and ensuring financial stability.

Minimum capital

An EMI in the European Union must have initial capital of at least EUR 350,000. After authorisation, it must maintain ongoing own funds at all times equal to at least the higher of EUR 350,000 or 2% of its average outstanding electronic money, calculated under Method D of EMD2. This requirement helps ensure that the institution’s capital remains proportionate to the scale of its e-money activities.

In the United Kingdom, similar requirements apply and are set by the Financial Conduct Authority.

In addition to initial capital, companies must maintain ongoing own funds based on the scale of their operations.

Governance and management

Regulators place strong emphasis on the company’s governance structure. Management must meet fit & proper criteria, including experience, reputation, and integrity.

The company is expected to have:

• A clear organizational structure
• Defined roles for management and control functions
• Designated officers for key areas such as compliance, risk, and AML

Weak governance is a common reason for licensing refusal.

Business plan and operational model

Applicants must submit a detailed business plan outlining products, target markets, and revenue model.

Regulators assess:

• The realism of financial projections
• Payment flow structures
• Risk analysis
• Business scalability

A well-prepared business plan significantly increases the chances of approval.

Safeguarding of client funds

Safeguarding client funds is a key regulatory requirement. EMIs must protect funds received from clients by keeping them separate from the institution’s own assets. This is typically achieved through:

• Segregated safeguarding accounts, or
• An insurance policy or comparable guarantee, where permitted.

These measures help ensure that client funds can be identified and returned if the EMI becomes insolvent.

In the UK, the FCA’s strengthened safeguarding regime under PS25/12 has applied since 7 May 2026. It introduces enhanced record-keeping, reconciliation, reporting, monitoring and safeguarding audit requirements. The FCA’s planned Post-Repeal Regime is also expected to introduce a statutory trust over safeguarded funds and assets, but this element is not part of the Supplementary Regime currently in force.

AML/KYC and compliance

Companies must implement a comprehensive compliance framework, including AML and KYC procedures. This covers customer identification, transaction monitoring, and risk management.

These requirements are based on international standards developed by the Financial Action Task Force and apply in both the EU and the UK.

Without a robust compliance system, obtaining an EMI license is not possible.

The process of obtaining an EMI license

The process of obtaining an EMI license requires careful preparation and close interaction with the regulator at each stage. Despite differences between jurisdictions, the overall licensing process in the EU and the UK is largely similar. Companies must not only prepare documentation but also demonstrate compliance with capital, governance, and compliance requirements.

Company incorporation

The first step is establishing a legal entity in the chosen jurisdiction. The company must be registered in accordance with local laws and have a structure that meets regulatory expectations. At this stage, the corporate model is defined, management roles are allocated, and key individuals are appointed, including directors and compliance officers.

Documentation preparation

The next stage involves preparing a full application package. It should clearly reflect the company’s business model, operational processes, and risk management framework. Particular attention is given to the business plan, financial projections, and AML/KYC procedures, as these are key areas reviewed by regulators.

Application submission

Once the documentation is ready, the company submits its application to the relevant authority, such as the Financial Conduct Authority in the UK or a national regulator in the EU. The application must be complete and compliant, as missing or incorrect documents can lead to delays or rejection.

Interaction with the regulator

After submission, an active interaction phase begins. Regulators may request additional documents or clarifications regarding the business model or compliance framework. This stage requires prompt responses and a willingness to refine certain aspects of the structure or documentation.

License approval

The final stage is obtaining the license, provided all requirements are met. The company then gains the right to provide payment services and issue electronic money within the выбранной jurisdiction. Even after approval, the company must continue to comply with regulatory obligations, including reporting, audits, and maintaining its compliance framework.

UK vs EU: key differences in EMI licensing

Despite a common regulatory foundation, EMI licenses in the European Union and the United Kingdom differ in several important ways. These differences are particularly relevant for companies planning to scale or operate across multiple markets. The choice of jurisdiction directly affects market entry strategy, regulatory burden, and growth potential.

Passporting and market access

A key advantage of an EU EMI license is passporting. It allows a company licensed in one member state to provide services across the entire EU without additional authorization. 

In the UK, this option no longer exists after Brexit. Companies with a UK EMI license cannot automatically operate in the EU and must obtain a separate license in an EU jurisdiction.

Regulatory approach

In the EU, regulation is more harmonized under PSD2 and EMD2, with coordination provided by the European Banking Authority. This creates a more predictable legal environment, especially for companies operating in multiple countries. 

In the UK, regulation is handled by the Financial Conduct Authority, known for its detailed and strict review process. Licensing may involve deeper scrutiny of the business model and compliance framework.

Licensing timeline and complexity

The time required to obtain a license varies by jurisdiction. In the EU, timelines depend on the specific country, but in some cases the process may be faster due to more standardized procedures.

In the UK, the process often takes longer due to the FCA’s thorough review, although this is offset by the strong international reputation of the license.

Compliance and operational requirements

Requirements for AML/KYC, safeguarding, and corporate governance are broadly similar in both jurisdictions. However, UK regulators place greater emphasis on the practical implementation of these processes rather than just formal documentation.

In the EU, requirements may vary by country, allowing companies to choose between more flexible or stricter regimes depending on their strategy.

Major mistakes when obtaining an EMI license

The EMI licensing process requires thorough preparation, yet many companies make mistakes that lead to rejection or significant delays. In most cases, issues stem from an underdeveloped business model, weak compliance, or failure to meet regulatory expectations.

Insufficiently developed business plan

A common mistake is a formal approach to the business plan. Regulators expect a clear description of the business model, revenue streams, and operational processes. If the plan lacks logical structure or realistic financial projections, it may raise concerns about sustainability and result in rejection.

Weak compliance framework

The absence of a robust AML/KYC framework is a critical flaw in any application. Regulators, including the Financial Conduct Authority, focus heavily on risk management and transaction monitoring. Superficial compliance descriptions without real processes often lead to additional queries or refusal.

Incorrect choice of jurisdiction

Some companies choose a jurisdiction without considering long-term strategy. This can limit scalability or require re-licensing in other countries. A proper jurisdiction choice should reflect target markets, regulatory requirements, and future expansion plans.

Unprepared management

Regulators assess not only the company but also its leadership. Lack of relevant experience among directors or key staff can be a major barrier to approval. Management must meet fit & proper criteria and demonstrate proven experience in the financial sector.

Documentation errors

Incomplete or improperly prepared documentation is another frequent cause of delays. Even minor inconsistencies can result in application rejection or additional scrutiny. Careful preparation and full alignment with regulatory standards are essential for successful licensing.

How Key2Law helps you get an EMI license

Obtaining an EMI license requires not only understanding regulatory requirements but also a well-structured legal strategy. Companies must consider the specifics of the chosen jurisdiction, capital requirements, compliance, and safeguarding of client funds. Mistakes at the preparation stage can lead to rejection or significant delays. The Key2Law team helps businesses navigate the licensing process efficiently and with minimal risk.

Our experts provide comprehensive support in the following areas:

• Analysis of the business model and assessment of the need for an EMI license
• Selection of the optimal jurisdiction based on business goals and regulatory requirements
• Development of the legal structure and corporate governance framework
• Preparation of a complete application package
• Implementation of AML/KYC and compliance procedures
• Support in interactions with regulators at all stages
• Post-licensing support, including reporting and compliance matters

A well-designed licensing strategy not only increases the chances of approval but also supports sustainable growth in a regulated environment. If you are planning to launch a fintech project or enter the European or UK market, the Key2Law team can help develop the right strategy and support you throughout the process.