What is a Financial License?
A financial license is a permit issued by regulatory authorities that allows a company to operate in the financial services sector. Such a license is required for companies providing services related to payments, currency exchange, issuance of electronic money, transaction processing, provision of loans and other financial operations.
Financial licenses are regulated by national and international legislation to ensure customer protection, compliance with anti-money laundering (AML) requirements and financial transparency.
Types of financial licenses
1. MSB (Money Services Business) – Financial Services License
An MSB license is required for companies engaged in money transfers, currency exchange, cryptocurrency transactions and other financial services. It is regulated by authorities in countries such as the US (FinCEN), Canada (FINTRAC) and others.
Typical services under the MSB license:
- Currency exchange;
- Money transfers;
- Cryptocurrency transactions (in some countries);
- Issuance of prepaid cards;
- Payment processing.
2. SPI (Small Payment Institution) — License for small payment transactions
SPI is a license that allows companies to provide payment services with certain annual turnover limits. It is used mainly in the European Union and is regulated by the PSD2 Directive (European Payments Directive).
Features of SPI license:
- Limited annual turnover (usually up to €3 million).
- No significant capital required.
- Suitable for fintech startups.
- Regulated by local financial authorities (e.g. FCA in the UK, BaFin in Germany).
3. EMI (Electronic Money Institution) — License for the issue of electronic money
An EMI license is required for companies that issue electronic money and provide payment services without turnover restrictions. It gives the right to issue electronic wallets, prepaid cards and other financial instruments.
Key features of the EMI license:
- Issuance and management of electronic money;
- Provision of payment services without limits;
- Opening of IBAN accounts;
- Possibility to work according to the banking intermediary model;
- Regulated by EU financial supervisory authorities (FCA, MFSA, NBB, etc.).
Each license is suitable for different types of businesses and has its own characteristics. The choice depends on the business model, target market and required financial services.
3. How to create your own digital bank
Steps to create a digital bank:
1. Defining a business model
Before launching a digital bank, it is important to determine what services it will provide:
- Payment transactions and money transfers;
- Currency exchange and cryptocurrency transactions;
- Issuance of electronic money and prepaid cards;
- Opening of virtual accounts (IBAN);
- Lending and investment services.
Choosing a business model will help determine which license is best for you.
2. Defining a Business Model
License nameDescriptionwho is it suitable for/th>
| MSB (Money Services Business) | Money transfers, currency exchange, cryptocurrency transactions, work with prepaid cards. | Financial companies, cryptocurrency platforms, payment aggregators. |
| SPI (Small Pyment Instiyution) | Limited payment services with an annual turnover of up to 3 million euros. | Fintech startups, small payment systems. |
| EMI (Electronic Money Institutiun) | Issuance of electronic money, full-fledged payment transactions, opened IBAN accounts. | Digital banks, large payment services. |
3. Company registration
- Selecting a jurisdiction (EU, Canada, UK, Singapore, etc.);
- Preparing statutory documents;
- Opening a corporate bank account;
- Appointing key employees (CEO, CFO, MLRO — anti-money laundering officer).
4. Obtaining a license
The licensing process includes:
- Preparation of a business plan;
- Compliance with anti-money laundering (AML) and customer identification (KYC) requirements;
- Implementation of a reporting and internal control system;
- Obtaining approval from the regulator (FCA, FinCEN, FINTRAC, MFSA, etc.).
5. Technical infrastructure
- Development of mobile and web applications;
- Integration with payment systems (SWIFT, SEPA, Visa, Mastercard);
- Connection of AML/KYC solutions (SumSub, Onfido, Veriff);
- Data security and compliance with GDPR requirements.
6. Launch and Scaling
- Testing and soft-launch;
- Marketing strategy and customer acquisition;
- Optimization of business processes;
- Entering international markets.
Our company LAWSKAR FINTECH helps with all this and can launch your project on a turnkey basis!
Requirements for obtaining SPI, MSB and EMI licenses
Obtaining a financial license requires compliance with a number of regulatory requirements that vary by jurisdiction. Let’s look at the main requirements for SPI (Small Payment Institution), MSB (Money Services Business) and EMI (Electronic Money Institution) licenses.
Legal entity
- The company must be registered in the jurisdiction granting the license (e.g. UK, EU).
Turnover limit
- The annual turnover must not exceed 3 million euros.
Physical presence
- An office in the licensing country, although the requirements for it are minimal.
Minimum capital
- Not required, but financial stability must be proven.
AML/KYC Compliance
- Internal procedures to combat money laundering and identify clients.
Policies and Procedures
- Providing the regulator with a business plan, risk management policy, and financial statements.
Who is it suitable for:
- Fintech startups;
- Payment aggregators;
- Online services with small turnover.
Requirements for EMI (Electronic Money Institution)
An EMI license gives the right to issue electronic money, open client accounts and issue payment cards.
Legal entity
- The company must be registered in the jurisdiction granting the license (e.g. UK, EU).
Turnover limit
- The annual turnover must not exceed 3 million euros.
Physical presence
- An office in the licensing country, although the requirements for it are minimal.
Minimum capital
- Not required, but financial stability must be proven.
AML/KYC Compliance
- Internal procedures to combat money laundering and identify clients.
Policies and Procedures
- Providing the regulator with a business plan, risk management policy, and financial statements.
Who is it suitable for:
- Digital banks;
- Payment platforms;
- Financial services with IBAN accounts.
Conclusion
The choice of license depends on the business model and scale of operations:
- SPI – for startups with small payment turnovers;
- MSB – for payment services, exchangers, cryptocurrency platforms;
- EMI – for large financial institutions issuing electronic money and payment cards
When choosing the best license, it is important to consider jurisdiction, capital, and regulatory requirements.
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Frequently Asked Questions
What license is suitable for cryptocurrency business?
For working with cryptocurrencies, MSB (USA, Canada, UK) or EMI (EU) are most often chosen, depending on the scale of operations.
Is it possible to obtain an SPI without an office in the licensing country?
Yes, in some countries an office is not required, but a registered legal entity and a local director are required.
What are the limitations of the SPI license?
The main restriction is that the company’s turnover must not exceed 3 million euros per year. It is also not allowed to issue electronic money.
What is the minimum capital required for an MSB?
Requirements vary:
- Canada – from $10,000
- USA – from $100,000 to $500,000 (depending on the state)
- UK – depends on the volume of transactions
Is a physical office required in Canada for an MSB?
Yes, a registered office is required, but having employees in the licensing country is not always necessary.
Is it possible to open client accounts with anMSB license?
No, MSB does not authorize you to open customer accounts or issue cards. You need an EMI for that.
Is it possible to get EMI without physical office?
No, the company must have a physical address in Canada and a designated Compliance Officer.
Which countries are most often chosen for EMI licenses?
Popular jurisdictions:
- Lithuania – fast licensing process, access to SEPA, low taxes
- Estonia – fintech support, convenient regulatory conditions
- UK – prestigious but expensive license
Is it possible to work with an EMI license throughout the EU?
Yes, the EMI license allows you to offer services in any country in the European Union.
Which license to choose to launch a digital bank?
For digital banking, EMI is most often used, as it allows opening client accounts and issuing payment cards.
Can I accept cryptocurrency with an EMIlicense?
It depends on the jurisdiction. In the EU, many regulators require a separate permit to work with cryptocurrencies.
What are the penalties for working without a license?
Fines vary by country but can reach into the millions of dollars. Business bans are also possible.
If you have additional questions, it is best to consult with licensing attorneys in your jurisdiction.
