Comments on the interpretation of Article 11(7) of the EMD2
Table of Contents
For over a year now, there has been intense discussion within the European e-money sector regarding a new interpretation of the definition of e-money by the European Commission (published in the EBA Q&As). Awet Yohannes and I had already addressed this topic and the discussion surrounding it on this blog in February 2025.[1] The basis for the discussion is EBA Q&A 2022_6336 (dated 17 January 2025).[2] In this document, the Commission takes the view that the criterion for the existence of e-money, namely that it be “accepted by a natural or legal person other than the electronic money issuer” pursuant to Article 2(2) of the EMD2, is not met if the underlying monetary value is not transferred as a “separate monetary asset” to the payee and there is no contractual agreement between the payee and the issuer.
With the exception of account-based e-money schemes, where both the payer and the payee hold an e-money account with the issuer (e.g. PayPal) and the e-money is transferred from account to account, these criteria are generally not met. This applies in particular to e-money products issued in so-called four-party schemes, such as ‘prepaid’ cards from Mastercard and Visa. The issuance of such cards was the trigger for the underlying request to the EBA. This product “fails to meet all of the criteria of the definition of electronic money”, according to the Commission in EBA Q&A 2022_6336.
If the Commission’s interpretation were correct, up to around 50%[3] of the value of the e-money volume of currently existing e-money products would no longer be classified as e-money.
Regulatory practice of national competent authorities
Even more than a year after the publication of the EBA Q&A, the administrative practice of most national competent authorities (NCA) in the EU remains unclear. There are strong indications that the case which prompted the enquiry to the EBA in 2022 concerned an issuer in Lithuania. The Commission therefore confirmed the view of the Lithuanian central bank. Market reports from Luxembourg and the Netherlands also suggest that the NCA´s share the new interpretation. In a “Dear CEO Letter” dated 18 December 2025, the Central Bank of Ireland invited e-money institutions based in the country to submit comments. It intends to clarify in the first half of 2026 what consequences the new interpretation will have for the business case and the licenses required by these institutions.[4] The Banque de France has adopted the Commission’s interpretation without comment in a presentation[5], thereby signaling its approval. I am currently unaware of the stance and corresponding activities of other NCA´s.
Transferability
The view that e-money – as a “monetary asset” – should always be transferred to the payee during a payment transaction (“transferability”) is, in my opinion, built on shaky ground. In my view, there is no legal basis for this view. On the contrary: during the period of relevance of the EMD1 (2000–2009), with the definition criterion regarding ‘acceptance’ remaining unchanged, de facto only bearer instruments (usually “stored-value cards”, such as the GeldKarte in Germany), which were non-transferable, were regulated as e-money. In retrospect, the EMD1 would otherwise have been a law without relevance.
Contractual agreement with the issuer
The Commission’s second argument, according to which the point of acceptance of the e-money should have a contractual relationship with the e-money issuer, is not so easily refuted. This argument is supported by Article 11(7) of the EMD2, to which the Commission refers in Q&A 2022_6336:
“Notwithstanding paragraphs 4, 5 and 6, redemption rights of a person, other than a consumer, who accepts electronic money shall be subject to the contractual agreement between the electronic money issuer and that person.”
Paragraphs 4 to 6, which precede paragraph 7, also relate to the e-money holder’s redemption rights. In particular, these paragraphs set out the conditions under which the issuer may charge a fee for redemption – in deviation from the general requirement for fee-free redemption set out in Recital 18 of the EMD2:
“Redemption should be possible at any time, at par value without any possibility to agree a minimum threshold for redemption. Redemption should, in general, be granted free of charge. However, in cases duly specified in this Directive it should be possible to request a proportionate and cost-based fee…”
Under Article 11(2) of the EMD2, the right of redemption is generally granted only to the e-money holder:
„Member States shall ensure that, upon request by the electronic money holder, electronic money issuers redeem, at any moment and at par value, the monetary value of the electronic money held.“
Paragraphs 2 to 6 do not distinguish between a consumer and a merchant (“person, other than a consumer”) in relation to the e-money holder. Consequently, one might conclude that these paragraphs apply to all e-money holders (regardless of their legal status). It is also reasonable to assume that the provisions under Article 11(2) to (6) of the EMD2, following paragraph 1 (“Member States shall ensure that electronic money issuers issue electronic money at par value on receipt of funds”), refer to the issuing contract between the issuer and the first e-money holder (natural and legal persons). There are strong indications to this effect – such as the reference to possible contract terms in paragraph 4 and the issuer’s duty to provide information prior to the issuance of e-money in accordance with paragraph 3. The “conditions of redemption” referred to in paragraph 3 are to be laid down in this issuing contract.
In my view, paragraphs 4 to 6, which are relevant to the interpretation of paragraph 7, therefore refer to the terms of redemption for the e-money holder, which are generally to be included in the contract between the issuer and the initial e-money holder in accordance with paragraph 3. A fee is only permitted under certain conditions, which must be regulated in the issuing contract in accordance with paragraph 4.
What arrangements now apply to the subsequent e-money holders (acceptors) in the payment chain, provided that the e-money is transferred?
In general, the right of redemption under Article 11(2) applies to every e-money holder, even if there is no direct contractual relationship between them and the issuer. Article 11(7) now refers to the redemption rights of an e-money acceptor who, through the payment transaction involving transferable e-money, becomes an e-money holder and is not a consumer. As a rule, this will be a merchant at whom one can pay using the underlying monetary value.[6]
Interpretation of the word ‘notwithstanding’
The question arises as to how the word “notwithstanding” (“paragraphs 4, 5 and 6”) used here in the English text of the EMD2 is to be understood. This term, frequently used by Anglo-American lawyers, is unfortunately ambiguous. For lawyers, it presents a challenge when interpreting the law[7] – or rather an advantage for job security? Several interpretations are linguistically possible:
- Paragraphs 4 to 6 are still relevant; paragraph 7 is an additional requirement,
- Paragraph 7 should be regarded as different from paragraphs 4-6,
- If the conditions of paragraphs 4-6 are not met then this paragraph 7 will apply.
The first interpretation would imply that paragraphs 4 to 6 are also intended to apply to merchants accepting e-money. As these provisions are naturally not set out in the issuer agreement, they would need to be included in a contract with the accepting merchant.
The second interpretation means that paragraphs 4 to 6 are not relevant to merchants. Accordingly, an acceptance agreement may stipulate different terms, such as the absence of a general exemption from fees. An argument against this interpretation is that, as discussed previously, paragraphs 4 to 6 do not distinguish between consumers and merchants in relation to the e-money holder.
Under the third interpretation, paragraph 7 would only apply if the merchant fails to meet the requirements of paragraphs 4 to 6. This interpretation would reinforce the previously discussed assumption that paragraphs 4 to 6 refer only to the first holders of the e-money. One could also argue here that redemption rights for non-e-money holders are regulated. However, this assumption contradicts paragraph 2, according to which redemption rights are granted only to e-money holders. In contrast to variant 1, however, paragraphs 4 to 6 (e.g. the general exemption from fees) would not apply.
Implementation of Article 11(7) of the EMD2 in Member States
The translations of Article 11(7) of the EMD2 into the official languages of the Union differ in substance with regard to the term “notwithstanding”. Variant 2 (“different from”) is the predominant interpretation. The UK (at that time still an EU member) also interprets “notwithstanding” to mean “different from”. According to Article 44 of the English E-Money Regulation, paragraphs 4 to 6 expressly do not apply to accepting entities.[8]
The German, Dutch, Danish and Greek translations of the EMD2, on the other hand, favor variant 1, according to which paragraphs 4 to 6 also apply to merchants. Since, de jure, all language versions are of equal standing, the problem arises that both variants are possible, and decisions may be based on whichever applies depending on the jurisdiction.
In Germany, we have the interesting situation that the official translation uses variant 1 (“unbeschadet”), whereas the German legislature deliberately opted for variant 2 when transposing the directive into national law (ZAG), giving the following reason: “It should be noted that the English version of the Directive (‘notwithstanding’) was misleadingly translated in the German version of the Directive as ‘unbeschadet’ rather than ‘abweichend von’.”[9]
In some other Member States (e.g. Sweden and Greece), we also see the reverse situation, where the translation includes variant 2, whereas the provision was transposed into national law in accordance with variant 1. According to the TIPIK analyses commissioned by the Commission[10], variant 2 (“different from”) predominates in the transpositions into national law. In only a few countries does the provision apply that paragraphs 4 to 6 are also to be applied to accepting merchants, such as the Netherlands, Spain and presumably also Greece. It is noteworthy that TIPIK, in the respective country-specific analyses on the transposition of the EMD2, apparently classifies both variants as compliant with the Directive.
Legislative history
A literal interpretation of the text therefore leads to an ambiguous result. The legislative history of paragraph 7 may provide further guidance. The paragraph stems from an amendment proposed by the European Parliament on 16 February 2009.[11]
This proposed amendment sets out the exceptions under which redemption charges are permitted. It further stipulates: “Redemption rights of merchants shall be subject to contractual agreement between issuers of electronic money and merchants.”[12] The explanatory statement reads: “This amends the report by removing ‘free of charge’ as some business models charge for issuing or redeeming e-money. It also clarifies that redemption charges between e-money institutions and merchants should be determined by contractual agreement.” Apart from the, in my view, inaccurately reductive wording that this provision is relevant only to e-money institutions (and not to credit institutions issuing e-money), this wording leaves open which variant is to apply here.
According to the legislative history, both variants therefore remain possible. One could conclude that the proposed amendment aims to ensure that redemption rights and any fees are to be set out either in the issuing contract or in a contract with the merchant.
It is worth noting, however, a comment in the “Explanatory Statement” accompanying this proposed amendment by the European Parliament: “We would prefer to see no redemption charges but also accept the right of parties to agree a contract (if they so wish), which may include redemption conditions and fees, so long as this is clearly detailed and is expressly agreed by the user.”[13] This suggests rather that a contract between the issuer and the acceptor is not required for the existence of e-money. Such a contract may, but need not, be concluded (“if they so wish”).
Conclusion
In my view, Article 11(7) of the EMD2 refers to the redemption rights of e-money accepting merchants who have become e-money holders through the acceptance of e-money. The provision thus presupposes a prior transfer of the e-money.
However, paragraph 7 refers exclusively to redemption rights and not to the acceptance of e-money. In my view, therefore, no general requirement to establish a contractual agreement between the issuer and the acceptor with regard to acceptance can be inferred from this provision.
In its Q&A, the Commission justifies its rejection of the further classification of prepaid cards in four-party systems as e-money by referring to Article 11(7) of the EMD2. In my view, however, this provision cannot be used as a sound justification due to a lack of substantive relevance.
[1] https://paytechlaw.com/en/eba-specifies-e-money-definition-what-does-this-mean-in-practice/
[2] https://www.eba.europa.eu/single-rule-book-qa/qna/view/publicId/2022_6336
[3] See PaySys-Report No. 2 (2025), p. 11.
[4] See Regulatory & Supervisory Outlook der Bank of Ireland of February 2026, p. 58-59. https://www.centralbank.ie/docs/default-source/publications/regulatory-and-supervisory-outlook-reports/regulatory-supervisory-outlook-report-2026.pdf?sfvrsn=715f721a_2
It is worth noting that this measure applies only to EMIs and not to credit institutions, which are also affected as issuers of e-money products.
[5] Presentation on the Forum Fintech of 9 October 2025, p. 11. See: https://acpr.banque-france.fr/system/files/2025-10/20251017_Forum-Fintech-ACPR-AMF-2025_Atelier_Paiement.pdf
[6] In the case of a consumer who accepts e-money (e.g. in the case of a peer-to-peer payment made using e-money), the redemption conditions set out in paragraphs 4 to 6 shall therefore apply.
[7] For a discussion of this wording, which is open to multiple interpretations, see, among others, https://www.mondaq.com/unitedstates/contracts-and-commercial-law/272744/the-vices-and-virtues-of-notwithstanding
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[8] See: https://www.legislation.gov.uk/uksi/2011/99/part/5/made
[9] Bundestagsdrucksache 17/3023 of 27 September 2010, p. 50.
[10] TIPIK-Analysis e.g. for Germany: https://finance.ec.europa.eu/document/download/32302bcc-aca5-4145-8715-00ed2f8b4d97_en?filename=germany_en.pdf
[11] See Amendment 13 to Art. 5.
[12] https://www.europarl.europa.eu/doceo/document/A-6-2009-0056_EN.pdf
[13] https://www.europarl.europa.eu/doceo/document/A-6-2009-0056_EN.pdf, p. 30.
