Introduction
The PSD 2 (Payment Services Directive 2) is a regulation established and developed by politicians of several EU (European Union) the Member States. The Directive’s primary intention is to expand the competition among various companies that specialize in providing a wide range of financial services with electronic money.
The context of the 117 articles provided in the document contains certain rules and methods that give regulators from such companies as the FCA (Financial Conduct Authority) powers to adjust the firms’ services to the needs of customers (according to their legal rights as of the EU’s citizens regarding any purchases they make and pay for). The following paper will summarize and simplify the most essential rules that have to be considered by regulators when working with companies that offer their clients various electronic payments services based on cryptocurrency (bitcoin, ripple, ethereum, and others).
Summary of the PSD 2 Articles
To begin with, it is necessary to mention that Article 1 of the PSD 2 contains the point (b) in its first paragraph accenting on the fact that the current document explains that all institutions operating with any forms of electronic money (cryptocurrency in particular) are obliged to follow the rules listed here and used by regulators of financial markets. The PSD 2 rules can be used against any company situated in the territory of the EU or have headquarters in other countries with representatives in the Union.
According to Article 18 and its third paragraph, regulators must control the fact that all the services provided by companies in the global cryptocurrency market and used by their clients on a regular basis are not allowed to convert any investments into deposits. Moreover, users of such services cannot legally receive any forms of funds that can bring additional profits to them. In other words, it is prohibited to receive returns on initial investments in any cryptocurrency with the help of different businesses that specialize in similar operations. This argument can be used by the FCA agents to avert any attempts of European citizens to earn money illegally and anonymously.
It would be proper to state that politicians from the EU decided to regulate the cryptocurrency industry as there is a tremendous number of illegal operations that can be done with the help of anonymous payment systems online. It appears that people can buy drugs, weapons, and other taboo products via private websites using bitcoin. Therefore, the role of the FCA agents is to make these financial institutions follow the regulations given in the PSD 2 to prevent such cases.
Nevertheless, there are certain exceptions provided in Article 42 of the PSD 2 that identify categories of users that are allowed not to reveal their personal data in cases if their transactions do not exceed the sum of €30 if the general price of operations amounts to €150, and if their maximum balance is not more than €150. According to the given article, providers of electronic financial services may disregard legislation stated in Articles 51, 52, and 56 (they obligate employees to deliver all the necessary information to their clients regarding their transactions).
Nevertheless, workers of companies that specialize in electronic money circulation have to inform their clients about all specific details and conditions that these individuals can face while using particular payment systems. The duty of regulators from the FCA is to make sure that all customers receive all the information before they invest or transfer their financial means. Otherwise, a fine will be imposed on the electronic payments company that decided not to educate its clients.
This procedure is important because there might be some conditions that can not satisfy clients. Therefore, people must choose from a list of similar companies to benefit from collaborations with them. This makes the competition among such firms fair. To conclude, it would be proper to state that the sums of money discussed in this paragraph previously can be extended to the point of €500 if the operation is made in the territory of the EU and was prepaid. Moreover, these sums can be cut or extended by representatives of any EU country’s government if the transaction does not pass the state’s borders.
Although Article 63 is almost identical with the one discussed in the previous paragraph, it enumerates some regulations of the PSD 2 that can be disregarded in case of low transactions or other operations with electronic money. In general, employees of financial institutions are allowed to provide less information about the conditions people will face while using their services. Also, they can provide fewer guarantees to clients (about the integrity of their financial means) whose payments do not exceed the sum of €30, or of the general price of their transactions is less than €150.
Nevertheless, providers of electronic payments services are not prohibited from providing all the information to their clients with low operations if they desire. The FCA agents must pay much attention to this rule to control companies that work with different types of cryptocurrency to monitor the situation in the market. Otherwise, even the minor requirements regarding the process of making customers aware of the services they use can be neglected by the providers.
Article 65 of the PSD 2 describes the primary duties of the FCA agents and other governmental regulators of electronic financial systems. The section says that the political structures of all the EU states must inform the service providers and confirm whether or not they have enough financial means available on accounts of clients to proceed with a certain operation. However, customers have to be asked permission to calculate the amount of money on their accounts before employees get access to these resources.
It would be proper to state that no one is allowed to see how much money clients have on their accounts until the owners request such a service. Regulators must control the confidentiality of electronic money users’ personal information. Also, it is necessary to ensure that the client agrees to proceed with his or her transaction by answering only “yes” or “no”. These measures are implemented to avoid the usage of customers’ agreements for other purposes.
Paragraph 4 of the Directive’s 111th Article emphasizes the fact that competent governmental structures of all the EU Member States must allow various electronic money services to operate with financial means through both legal and natural persons. In addition, if any company that specializes in electronic payments functions in the territory of a foreign EU country, rules 27-31 of the PSD 2 (that prescribe regulations of conflicts along with customers’ rights and freedoms) can be partially disregarded.
In turn, Article 18 (paragraph 4 in particular) says that all the firms that worked with cryptocurrency and followed the guidelines indicated in the PSD 2 before its establishment do not need to undergo the procedure of additional examination intended to identify whether or not a particular company fits all the necessary competition requirements. All the information to evaluate the competency of any e-payments service provider must be sent to regulators by the 13th of July, 2018. The latter workers will have enough time to assess every member of the cryptocurrency industry and confirm or decline their requests to continue their professional activities.
The last section of the PSD 2 that has to be mentioned in this paper is Article 112 as it describes certain rules that every regulator must adhere to while working with electronic money companies. It is stated that workers of regulatory institutions must not exceed their legal rights and powers and are prohibited from indulging their own benefits using resources provided to them by their employers. Also, it is said that all the rules enumerated and described in the Directive are valid in the territory of the European Union and other countries if their fillies function in one of the Member States.
Conclusion
All the rules chosen and summarized in the paper were identified and described from the perspective of an FCA regulator. These are the primary directions that must be followed while working with companies that specialize in electronic money operations. All the simplifications are made concerning companies that will be obliged to undergo the upcoming annual examination to prove that their professional activities are legal and set according to the PSD 2. It would be proper to state that the current work is not a document that must be considered by the service providers. The main goal of this explanation was to outline the most important rules for regulative institutions and their workers.