The Financial Conduct Authority (FCA), a regulatory body of the UK government, granted local London-based Blockchain startup Tramonex a Small Electronic Money Institution (EMI) registration, effectively allowing the launch of a Blockchain-based currency within the UK.
The approval of Tramonex marks the first case of a Blockchain technology company receiving an EMI authorization from the FCA.
What it means to be an EMI-authorized company
In 2011, the FCA released the Electronic Money Regulations to provide certain financial service providers and institutions the ability to operate as a money transmission firm and payment facilitator. To be approved by the FCA and obtain an EMI authorization, a company must be fully compliant with local regulations, security requirements and reporting and notification requirements.
In order to remain as an EMI-authorized company within the UK, a startup needs to allocate a significant amount of resources and capital to ensure none of its operations are in conflict with the regulations imposed by the FCA.
Once an EMI authorization is granted, a startup can begin to issue, distribute and redeem e-money. That means a Blockchain startup like Tramonex can issue a legal Blockchain-based currency, facilitate payments, launch applications or service on top of its infrastructure.
Transparency and lack of privacy
While users can be assured of the legality of Tramonex’s Blockchain-based services and payment networks, one limitation of an EMI-authorized operator’s financial services is the lack of financial privacy.
Under the FCA’s requirements, EMI-licensed startups are required to provide regular “reporting information” to comply with the FCA’s supervisory and reporting obligations. Although the type of information is not specified, the FCA could ask startups to submit any form of data that the agency may need, such as financial information and personal details of users.
Although Marc Avedissian, co-founder of Tramonex Labs, assures users of strict regulatory compliance and cheap transactions, the monthly report requirement of the FCA could result in the elimination of user privacy.
“Automation of payments using the Blockchain and smart contracts will reduce the costs of transactions, allowing for the adaptation of this solution across many different fields such as insurance, real estate and government, to name only a few. Previously, the missing link was a lack of regulation – Tramonex Labs is very proud to provide a regulated environment where digital payments can be executed in a secure and transparent way.”
Still, the approval of Tramonex as an EMI company is an optimistic sign for the Blockchain industry in the UK. In the future, if an increasing number of Blockchain firms and developers secure regulatory licenses from the government, they will be able to operate under a more transparent and regulatory viable ecosystem.