Best EU jurisdictions for EMI license

[dave0839511]

Hey.

We consider to bootstrap an EU EMI license, as we have the software and law expertise in house.

What do you guys recommend as the cheapest and most welcoming jurisdiction for licensing in 2025, Estonia Lithuania or some other?

Thanks in advance!!

 

[SCHLOSSFINANZ]

Liechtenstein

 

[dave0839511]

Liechtenstein

Expensive but maybe it has some advantages compared with eastern Europe?

 

[SCHLOSSFINANZ]

First class reputation, low taxes and fast licencing process. And you are entitled to a Swiss National Bank account

 

[Sols]

We consider to bootstrap an EU EMI license, as we have the software and law expertise in house.

What do you guys recommend as the cheapest and most welcoming jurisdiction for licensing in 2025, Estonia Lithuania or some other?

If you're not comfortable committing a few million: don't. Just partner with a Banking-as-a-Service provider like Modulr, OpenPayd, or Intergiro if all you want to do is build a good product.

The bare costs might just be a few hundred thousand in theory, but most regulators expect to see a capital commitment of a few million or they will be very hesitant to issue a license. Issuing a license is a lot of upfront and ongoing work for a regulator. You pose an economic, regulatory, and reputational risk. Regulators don't want to issue license to someone who's going to fail and cause a mess, or someone who knowingly or inadvertently becomes a laundromat for criminals.

If you have a few million, then look at jurisdictions less form a cost perspective and more from a suitability perspective. Who are your customers? What do they do? Why are you targeting them?

Liechtenstein

First class reputation, low taxes and fast licencing process. And you are entitled to a Swiss National Bank account

Liechtenstein is interesting, but I'm not sure it's really fair to look at such a vague description as above and call Liechtenstein the best.

The focus in the description we got here is on cost and openness. I don't think Liechtenstein satisfies those two particularly well. It's a high-cost jurisdiction and a regulator that doesn't exactly exude a welcoming aura. They're not hostile, but they have a long way to go compared to most of their peers.

It's a strong banking jurisdiction but for fintech, it's practically unheard of. IIRC, it has lost more EMI and PI licensees than it currently has active (four). And two of the current licensees subsidiaries/majority owned by Swiss banks (Cornèr and Hypothekarbank Lenzburg).

Headline tax is generally not a concern when people start financial institutions. If it were, there wouldn't be huge fintech sectors in countries like Germany, France, Netherlands, and Spain. But if headline tax rate truly mattered much, why would anyone form an EMI in Germany when they could go to Malta and simply passport the license? However, if headline tax rate is a major concern, you can get very similar or lower in for example Lithuania, Malta, Cyprus, and Ireland.

I'm not sure how one would even quantity speed of licensing Liechtenstein. If my memory is right, FMA has handled fewer than 10 total EMI and PI licenses in total. Compare that to the enormous numbers in Lithuania, Cyprus, Malta, Germany, France, Spain, Luxembourg, Netherlands. Yes, those places may have backlogs at times but at least the people there are experienced. You know what to expect. FMA might be fast — who knows? You're throwing yourself into the unknown.

I'm not saying Liechtenstein is bad. But I'd only pick Liechtenstein after carefully considering the business plan and how well it matches with FMA's expertise and experience. For a cookie cutter setup, I'd go with a place that has issued a couple of dozen licenses.

 

[dave0839511]

Thabk

If you're not comfortable committing a few million: don't. Just partner with a Banking-as-a-Service provider like Modulr, OpenPayd, or Intergiro if all you want to do is build a good product.

The bare costs might just be a few hundred thousand in theory, but most regulators expect to see a capital commitment of a few million or they will be very hesitant to issue a license. Issuing a license is a lot of upfront and ongoing work for a regulator. You pose an economic, regulatory, and reputational risk. Regulators don't want to issue license to someone who's going to fail and cause a mess, or someone who knowingly or inadvertently becomes a laundromat for criminals.

If you have a few million, then look at jurisdictions less form a cost perspective and more from a suitability perspective. Who are your customers? What do they do? Why are you targeting them?



Liechtenstein is interesting, but I'm not sure it's really fair to look at such a vague description as above and call Liechtenstein the best.

The focus in the description we got here is on cost and openness. I don't think Liechtenstein satisfies those two particularly well. It's a high-cost jurisdiction and a regulator that doesn't exactly exude a welcoming aura. They're not hostile, but they have a long way to go compared to most of their peers.

It's a strong banking jurisdiction but for fintech, it's practically unheard of. IIRC, it has lost more EMI and PI licensees than it currently has active (four). And two of the current licensees subsidiaries/majority owned by Swiss banks (Cornèr and Hypothekarbank Lenzburg).

Headline tax is generally not a concern when people start financial institutions. If it were, there wouldn't be huge fintech sectors in countries like Germany, France, Netherlands, and Spain. But if headline tax rate truly mattered much, why would anyone form an EMI in Germany when they could go to Malta and simply passport the license? However, if headline tax rate is a major concern, you can get very similar or lower in for example Lithuania, Malta, Cyprus, and Ireland.

I'm not sure how one would even quantity speed of licensing Liechtenstein. If my memory is right, FMA has handled fewer than 10 total EMI and PI licenses in total. Compare that to the enormous numbers in Lithuania, Cyprus, Malta, Germany, France, Spain, Luxembourg, Netherlands. Yes, those places may have backlogs at times but at least the people there are experienced. You know what to expect. FMA might be fast — who knows? You're throwing yourself into the unknown.

I'm not saying Liechtenstein is bad. But I'd only pick Liechtenstein after carefully considering the business plan and how well it matches with FMA's expertise and experience. For a cookie cutter setup, I'd go with a place that has issued a couple of dozen licenses.

Thank you for an indepth response. Our working plan was to hire two experienced staffers in Lithuania, one for AML/compliance, another for finance operations, set up a small local office in the country. Put up around 200k for expenses + 350k capital. Then handle the application procedure by our internal knowledge ( maybe copy some blueprint EMI records that are public), and use our own IT-wallet system which we have developed. But maybe this is native thinking?

 

[daniels27]

Thabk

Thank you for an indepth response. Our working plan was to hire two experienced staffers in Lithuania, one for AML/compliance, another for finance operations, set up a small local office in the country. Put up around 200k for expenses + 350k capital. Then handle the application procedure by our internal knowledge ( maybe copy some blueprint EMI records that are public), and use our own IT-wallet system which we have developed. But maybe this is native thinking?

There are two options. Either you are real good or you are completely naive. You can look at your code quality, you will most likely see within 1 minute which one is the case.

 

[dave0839511]

There are two options. Either you are real good or you are completely naive. You can look at your code quality, you will most likely see within 1 minute which one is the case.

I completely agree. I will share the results with you in 1 year, and then we'll see

 

[daniels27]

I completely agree. I will share the results with you in 1 year, and then we'll see

Yes, and of course we hope that you are real good! Please let us know when there is a beta available to try!

 

[Sols]

Thabk

Thank you for an indepth response. Our working plan was to hire two experienced staffers in Lithuania, one for AML/compliance, another for finance operations, set up a small local office in the country. Put up around 200k for expenses + 350k capital. Then handle the application procedure by our internal knowledge ( maybe copy some blueprint EMI records that are public), and use our own IT-wallet system which we have developed. But maybe this is native thinking?

You will not get a license with that budget.

Go speak with Modulr, OpenPayds, Intergiro, and other BaaS providers. Find someone who's aligned with you. Build a product. Get customers. Then once you have a couple of millions and some momentum, you'll be in a much better position to get a license.

 

[dave0839511]

You will not get a license with that budget.

Go speak with Modulr, OpenPayds, Intergiro, and other BaaS providers. Find someone who's aligned with you. Build a product. Get customers. Then once you have a couple of millions and some momentum, you'll be in a much better position to get a license.

Harsh reality. But when you say that I need a couple of millions are you referring to the authorities requirement of internal financial strength, or the capital needed to succeed with all other business aspects marketing etc?

 

[Sols]

Harsh reality. But when you say that I need a couple of millions are you referring to the authorities requirement of internal financial strength, or the capital needed to succeed with all other business aspects marketing etc?

They're the same thing. The regulator wants to see that you have enough money to execute your business plan.

The licensing process is not...
Do you have 350,000 EUR?
Do you have a compliance?
OK, great, here's your license.

The licensing process is more like...
Do you have 350,000 EUR?
What kind of customers will you target?
What kind of services will you offer?
How will you market?
Who is your MLRO? What is their background?
What is your AML/KYC framework?
Show month by month for the next 36 months your transaction volumes and average balances. But hold on, show me 2—4 different calculations to show how you handle adverse market changes.
Show CVs of your management team demonstrating that they have years of experience in financial services.
Show a detailed business plan for the next three years.
And so...

Based on your answers and the regulators' findings, they will calculate how much you must have in "Own Funds," which is often a cash reserve calculated as a percentage of volumes and balances. The Own Funds are there to cover for losses in a going concern.

The licensing process usually takes 12—24 months. With a budget of 200,000 EUR for expenses, you don't have anywhere near enough for all the staff, software subscriptions, memberships, and other costs that you will need to pay. Some costs can wait until after launch but some cannot. You'll typically be paying a couple of people's salaries for several months just to make sure they are ready when the license arrives.

 

[CyprusLaw]

Harsh reality. But when you say that I need a couple of millions are you referring to the authorities requirement of internal financial strength, or the capital needed to succeed with all other business aspects marketing etc?

Cyprus is a very strong jurisdictions for EMIs, with more and more "big players" obtaining licenses here.

However, as Sols mentioned, with the budget you have mentioned it is almost impossible.

An option you could consider would be becoming an EMD under an already licensed EMI. From our experience with other clients having similar structures the cost is around Euro 10,000 per month and the EMD registration procedure takes around 2 months.

Another option would be to get a MiFID 2 license and combine it with an EMD.

Feel free to send me a PM if you want to discuss this more.

 

[dave0839511]

They're the same thing. The regulator wants to see that you have enough money to execute your business plan.

The licensing process is not...
Do you have 350,000 EUR?
Do you have a compliance?
OK, great, here's your license.

The licensing process is more like...
Do you have 350,000 EUR?
What kind of customers will you target?
What kind of services will you offer?
How will you market?
Who is your MLRO? What is their background?
What is your AML/KYC framework?
Show month by month for the next 36 months your transaction volumes and average balances. But hold on, show me 2—4 different calculations to show how you handle adverse market changes.
Show CVs of your management team demonstrating that they have years of experience in financial services.
Show a detailed business plan for the next three years.
And so...

Based on your answers and the regulators' findings, they will calculate how much you must have in "Own Funds," which is often a cash reserve calculated as a percentage of volumes and balances. The Own Funds are there to cover for losses in a going concern.

The licensing process usually takes 12—24 months. With a budget of 200,000 EUR for expenses, you don't have anywhere near enough for all the staff, software subscriptions, memberships, and other costs that you will need to pay. Some costs can wait until after launch but some cannot. You'll typically be paying a couple of people's salaries for several months just to make sure they are ready when the license arrives.

You are a (man) of hands on experience, appreciate the detaild input given. It roughly aligns with my expectations, except for the delayed licensing time and possible increase of own funds. I was calculating that own funds of 350k euro would be sufficuent if outstanding deposits is below 15 m euro.
Shoot me a DM if you are interested to do some consulting or collabs in the area

 

[sknomad]

Even in EU, there are huge differences for EMI licensing in each country.

You mentioned that yku have i house lawyers.

The only effective way will be to apply in a countrey wheee your lawyers are. Do not expect lawyers from country A to be able to handle EMI licensing process in a country B. Financial law of EU countries is too complex.

 

[fintechwizard]

Its true that the Core Ledger and Banking software if used as SaaS are usually a big chunk of the running costs for an EMI, having your own is a good asset.
However, the licensing process can be lengthy, and other than the capital, you will indeed need ressources on the legal side to produce the whole documentation for the regulator, and then have your MLRO and onboarding team ready to process applications.
Depending on your target audience, you would also need a "sales team" to manage inbound leads and generate outbound while having to balance it with the risk appetite of your underlaying banking provider.
Finding the sweet spot between your risk appetite and your banking provided policy will be the key factor, combined with your pricing strategy.
Having done it, running costs are always under estimated

 

[Lincoln Burrows]

Go speak with Modulr, OpenPayds, Intergiro, and other BaaS providers. Find someone who's aligned with you. Build a product. Get customers. Then once you have a couple of millions and some momentum, you'll be in a much better position to get a license.

I'd highly suggest avoiding OpenPayd and Intergiro, unless you're looking for headache.

Good BaaS providers that I'd recommend are Banking Circle, Modulr, Clear.bank and there are many more options if you're looking to dig that road.

An EMI license is considered the highest electronic license in financial licenses. What you could do is get something such as a Payment Institution (PI) license / Payment Service Provider (PSP) license or equivalent, depending on the jurisdiction, which will cost less time and money, then go through onboarding with a BaaS provider, and you're good to go.

That's what most of the finance apps are doing nowadays.

It's like, would you go through the rigorous road of being a Visa Principal Member or sign a card issuing/BIN sponsorship agreement with a Principal Member?

 

[Lincoln Burrows]

It's also worth noting that a license may not even be required to sign a deal with a BaaS provider and start issuing IBANs in customer's names. However, there will be some restrictions on the type of operations the clients can do, such as sending to foreign entities, currency exchange, etc. And that's why a license is required to start unlocking these capabilities and offer full banking service to your clients.

 

[no1d]

Random question, what are you trying to bring new to the market compared to bunq, zen, monese, vivid, etc?

 

[dave0839511]

@no1d roughly speaking same as others but with lower capex and opex (hopefully), ill also provide open banking, and later acquiring, PG-services and cross-border remittance.

@Lincoln Burrows @Sols Id rather avoid building on someone elses infractructure, the whole value of business (in case of exit) is the infrastructure

On another note, just read that lithuania is anti any for of ICO or crypto-backed debit card services of EMIs. Is there any other favourable jurisdictions for this? Much appricated!!