The Council of Latvijas Banka has approved an initiative that will enable non-bank payment service providers – payment and e-money institutions – and in the future also crypto-asset service providers to open an account with Latvijas Banka for the segregation of their customer funds.
Likewise, Latvijas Banka will provide non-bank payment service providers with the possibility to directly participate in the Electronic Clearing System (EKS), thus facilitating the development of payment services in Latvia.
It is planned that the possibility to open an account for separate holding of customer funds in euro with Latvijas Banka will be provided to payment and electronic money institutions licensed within the single market of the European Economic Area (EEA) and to crypto-asset service providers licensed in accordance with the European Union’s Markets in Crypto-Assets Regulation (MiCA).
The segregation of customer funds is one of the key licensing requirements for payment and e-money institutions, as well as for crypto-asset service providers. Providing these institutions with the possibility to open an account with Latvijas Banka will strengthen the protection of their customers.
In addition to the above, Latvijas Banka will provide non-bank payment service providers with the possibility to directly participate in the EKS – Latvijas Banka’s payment system ensuring the processing of retail payments across the SEPA, i.e. in the countries of the European Union and the European Economic Area. Currently, direct participation is available to credit institutions and the Treasury. The initiative approved by Latvijas Banka envisages that the possibility to directly participate in the EKS will be also provided to payment and electronic money institutions, as well as to credit unions. Thus, all Latvia’s payment service providers will be given equal opportunities facilitating the development of payment services in Latvia.
Latvijas Banka and the Ministry of Finance agreed on the necessary changes in the national regulatory framework for the implementation of both initiatives. Prior to promoting the initiatives, Latvijas Banka also analysed the needs of the financial sector participants. Today it has a meeting with the industry representatives to discuss the planned services.
Latvijas Banka is planning to start introducing both services – the possibility for licensed payment and electronic money institutions and licensed crypto-asset service providers to open an account with Latvijas Banka for the segregation of their customer funds and the possibility for non-bank payment service providers to participate in the EKS – already this year to bring them to the market starting from June 2024 if changes in the national regulatory framework will be approved during this time.
An innovation-supporting infrastructure is one of the cornerstones for the development of the fintech environment and innovative financial services and one of the recommendations outlined in Latvia’s fintech sector development strategy. A secure and developed financial sector is one of the strategic priorities of Latvijas Banka.
Featued image credit: Edited from freepik
