EMI or Bank Abroad: What Changes in Protecting Your Money

An EMI (electronic money institution) issues electronic money and cannot take deposits. A bank takes deposits and uses them to make loans. The difference that matters most to someone keeping money abroad is protection: in the United Kingdom, the FSCS covers deposits at banks, but not money held at EMIs.

What is an EMI and how does it differ from a bank?

According to the FCA, the UK financial regulator, electronic money is monetary value stored electronically, represented by a claim against the issuer, issued on receipt of funds for the purpose of making payments and accepted as a means of payment by someone other than the issuer. The examples cited are prepaid cards and electronic prepaid accounts for online use.

In the European Union, Directive 2009/110/EC defines an EMI as a legal person authorized to issue electronic money (art. 2). Electronic money is a claim of the customer against the issuer, and the EMI must issue it at par value on receipt of the funds (art. 11(1)).

Is the money in an EMI protected if it fails?

It is protected by a safeguarding rule, not by deposit insurance. The Directive requires Member States to impose on EMIs the protection of funds received in exchange for electronic money (art. 7(1)). The idea is to separate customers' money from the EMI's own assets.

The FSCS, the British compensation scheme, covers deposits at banks, building societies and credit unions authorized in the United Kingdom. For a failure after November 30, 2025, the limit is £120,000 per eligible person, per institution, according to the FSCS page. The FCA states that some firms and activities fall outside FSCS coverage, and expressly cites money held at electronic money institutions.

In practice, what you should check is whether the EMI holds the funds in a segregated account and how the contract treats a possible insolvency. If the balance is high, the absence of deposit insurance is a risk factor that weighs on the choice.

What can and can't an EMI do?

The Directive allows an EMI to issue electronic money and provide payment services (art. 6(1)). It cannot receive deposits or other repayable funds from the public (art. 6(2)), and funds received from holders of electronic money must be exchanged for electronic money without delay (art. 6(3)).

Credit linked to payment services is permitted, but it cannot be granted from the funds received in exchange for electronic money (art. 6(1), final subparagraph). For that reason, anyone who needs deposit products or credit granted with the deposited money itself needs a bank. Confirm in the contract and in the institution's authorization what it actually offers.

The contract must clearly state the redemption conditions, including fees, and the customer must be informed before being bound (art. 11(3)). Read that clause before opening the account.

EMI or bank: which should you choose, depending on use?

There is no single answer. The choice depends on what the account will do and how much money will sit in it. Without comparing brands, the safest criterion is this:

Anyone with a company abroad should also look at the structure behind the account. The Delaware jurisdiction and the Wyoming jurisdiction are common starting points, and the corporate structures service explains the alternatives. If you want a view by product type, also read about offshore neobanks.

How do you check an EMI or a bank before opening the account?

Follow these steps, in order:

1. •Confirm the authorization in the regulator's register. For the United Kingdom, use the FCA Financial Services Register.
2. •Ask whether customers' money is held in a separate safeguarding account and at which institution.
3. •Ask whether there is insurance or a compensation scheme for your balance and what the limit is.
4. •Read the redemption conditions and the fees in the contract.
5. •Ask what tax information the institution sends to the authorities.

Fees, spreads and opening times vary from one institution to another and over time. This article does not list those amounts because there is no single official source for them; ask for the current table in writing. To choose the account format best suited to your case, see the offshore banking service.

How does Brazil treat the balance and income of an account abroad?

The Brazilian treatment depends on whether you are a resident of Brazil, not on the type of institution. Two sets of rules apply: individual income tax and the declaration of Brazilian capital abroad.

Law No. 14,754/2023 (Lei 14.754/2023). Art. 3, § 1, I, treats as financial investments abroad, by way of example, interest-bearing bank deposits and digital wallets or checking accounts with earnings. Item II lists as income, among others, the exchange-rate variation of foreign currency, earnings in digital wallets or interest-bearing checking accounts, and interest. They are taxed in the annual adjustment at 15%, with no deductions (art. 2, § 1), and counted when actually received (art. 3, § 2). Art. 3, § 3 leaves to the Federal Revenue Service (Receita Federal) regulation the classification of digital wallets as a financial investment. Check that regulation for your type of account.

Art. 4 allows deducting tax paid abroad on the same income when there is a treaty providing for offsetting or reciprocity of treatment, within the limits of the article itself.

BCB Resolution 279 (CBE). It defines Brazilian capital abroad as funds, goods, rights and assets of any nature held outside the country by residents (art. 1), and lists deposits at non-resident institutions among the information to be provided (art. 7, VI). The annual declaration is mandatory when the total, on December 31, equals or exceeds US$ 1,000,000.00 or the equivalent in other currencies (art. 10), and it is filed from February 15 to April 5 of the following year (art. 13). Add up all accounts, at banks and at EMIs, when checking the threshold, and confirm on the CBE page at the Central Bank how to classify an electronic money balance.

For the tax overview and ancillary obligations, see tax planning and compliance. The same logic applies to structures such as the one described in DAO with a legal wrapper: what matters for Brazil is what the resident holds and receives.