Electronic Money Institution License in the Czech Republic

Are you planning to launch a fintech business in Europe? This guide provides clear, actionable answers on how to obtain an Electronic Money Institution (EMI) license in the Czech Republic. For foreign companies seeking a strategic entry point into the EU, understanding this process is critical. As a leading law firm based in Prague, European Union, ARROWS specializes in helping international clients navigate this complex regulatory landscape. Our English-speaking lawyers in Prague are ready to manage your entire application, ensuring a smooth path to market.

Need advice on this topic? Contact ARROWS Law Firm at office@arws.cz or +420 245 007 740. Your question will be answered by "Mgr. Marek Hučík", an expert on the topic.

Is an EMI License the Right Move for Your Business?

Before starting the application process, it is essential to determine if an Electronic Money Institution (EMI) license aligns with your company's strategic goals and operational model. This license is more than a regulatory requirement; it is a powerful tool for growth and market access within the European Union.

What is an Electronic Money Institution (EMI)?

An Electronic Money Institution is a legal entity licensed to issue "e-money." In simple terms, e-money is the digital equivalent of cash, stored electronically on a device like a prepaid card or in a virtual account, often called an e-wallet. An EMI license is the legal key that unlocks the ability to offer a wide range of modern financial services, including digital wallets, prepaid payment cards, and complex online payment processing systems.

The legal framework, specifically the Czech Act No. 370/2017 Coll. on Payment Systems, defines the core activity of an EMI as handling a payment transaction. This term covers any act of placing, withdrawing, or transferring funds on behalf of a client. Holding an EMI license signals to customers, partners, and regulators that your business operates at a high standard of security and compliance.

Which Business Models Require an EMI License?

An EMI license is essential for any business whose model involves issuing and managing electronic money. If your company plans to store customer funds for future use, this license is almost certainly required.

Common business models that necessitate an EMI license include:

• Digital Wallet Providers: Companies offering applications where users can store funds electronically to make payments or transfers.
• Prepaid Card Issuers: Businesses that provide physical or virtual cards which users can load with funds for spending at various merchants.
• Online Payment Platforms: Marketplaces or service platforms that facilitate payments between users and hold funds in escrow or in user accounts before payout.
• Remittance Services with Stored Value: Money transfer services that allow users to hold balances in an account before sending funds internationally.

The Ultimate Advantage: A Single License for the Entire EU Market

The most significant strategic benefit of obtaining an EMI license in the Czech Republic is the automatic access it provides to the entire European Single Market. This is achieved through a mechanism known as passporting.

Once licensed by the Czech National Bank (CNB), your institution gains the right to offer its services across all 30 member states of the European Economic Area (EEA) without needing to apply for a new license in each country. This single license approach transforms the complex European regulatory map into one unified market, making a Czech EMI a highly efficient and cost-effective vehicle for pan-European expansion.

For a foreign company, this means establishing one compliant entity in Prague can serve as the launchpad for a business serving over 500 million consumers. The decision to pursue an EMI license should therefore be viewed not just as a compliance task but as a foundational strategic investment. It enhances credibility, builds customer trust, unlocks partnerships with traditional financial institutions, and provides the legal architecture for scalable growth across the continent.

Why the Czech Republic is a Premier Hub for Your Fintech Venture

Choosing the right jurisdiction for your EMI license is a critical decision that will impact your operational costs, regulatory burden, and growth potential. The Czech Republic offers a compelling combination of stability, innovation, and strategic advantages, making it a premier choice for foreign fintech companies.

A Stable and Secure Base in the Heart of Europe

The Czech Republic is a politically stable and economically prosperous member of the European Union. Its financial market is overseen by a strong and independent regulator, the Czech National Bank (CNB), ensuring a transparent and predictable business environment. Located at the geographical center of the continent, the country serves as a natural gateway to the entire European market, supported by advanced transport and digital infrastructure.

This stability is a key asset. While some fintech hubs have experienced rapid growth followed by sudden regulatory crackdowns, the CNB is known for its measured and technology-neutral approach to supervision. This prudence translates into long-term regulatory predictability, allowing businesses to plan for sustainable growth with confidence. For foreign investors, a license from the CNB is a mark of quality and resilience. ARROWS, as a leading Czech law firm in Prague, EU, provides the local expertise to navigate this robust framework.

A Thriving and Innovative Fintech Ecosystem

The Czech Republic is not just stable; it is also a dynamic hub for financial innovation. The country is home to over 200 active fintech companies, and the sector has doubled in size over the last five years. This growth is fueled by a tech-savvy population with one of the highest rates of contactless payment adoption in the world—99% of all domestic card transactions are contactless.

This creates a highly receptive market for new digital financial products. The Czech government actively supports this ecosystem, with initiatives like the development of a "regulatory sandbox" in cooperation with the OECD to allow fintech firms to test innovative solutions in a controlled environment.

Access to a Skilled and Cost-Effective Talent Pool

A major operational advantage of the Czech Republic is its deep pool of highly skilled technology professionals. The country has more than 150,000 IT specialists, with thousands more graduating from its technical universities each year. This talent is available at a significantly more competitive cost compared to hubs in Western Europe, allowing fintech companies to build and scale their technical teams efficiently.

For any scaling tech company, access to talent is a primary concern. The Czech Republic provides a sustainable solution, combining world-class technical skills with favorable labor costs. Need legal help with employment contracts or visas? Contact us at office@arws.cz.

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Favourable Business and Tax Environment

The Czech Republic maintains a competitive and stable corporate income tax rate of 21% (as of 2024). The country has a long history of welcoming foreign direct investment and offers a transparent system of investment incentives and strong legal protections for foreign-owned businesses, including numerous bilateral treaties for the avoidance of double taxation. This creates a reliable and business-friendly climate for long-term investment.

EMI vs. Payment Institution (PI) License: A Crucial Strategic Decision

One of the first and most important decisions a fintech company must make is whether to apply for an Electronic Money Institution (EMI) license or a Payment Institution (PI) license. While they overlap, their capabilities are fundamentally different, and choosing the wrong one can severely limit your business's growth potential.

Understanding the Core Difference: Issuing E-Money

The single most important distinction is that an EMI can issue and store electronic money, whereas a PI cannot. An EMI can provide customers with an e-wallet where their funds can be held for an indefinite period, ready for future transactions. 

A PI, in contrast, can only execute payment services by moving funds from a customer's pre-existing bank account to a recipient. It can hold funds only temporarily and exclusively for the purpose of completing a specific payment transaction.

Comparing Key Requirements and Capabilities

This fundamental difference in function leads to different regulatory requirements, particularly concerning the initial capital. This is a legal term referring to the minimum amount of funds a company must have to secure a license and ensure it can operate safely.

• Services: An EMI can provide all the services of a PI (such as money remittance and payment processing) plus the issuance of e-money (e-wallets, prepaid cards).
• Initial Capital: An EMI requires a minimum initial capital of €350,000. A PI requires a lower amount, ranging from €20,000 to €125,000, depending on the specific payment services it offers.
• Regulatory Scrutiny: Because EMIs hold and safeguard customer funds, the CNB's application review process is more intensive and detailed compared to that for a PI.

Choosing a PI license because of the lower capital requirement can be a costly mistake if your business plan includes future services like stored-value accounts. Upgrading from a PI to an EMI license is not a simple amendment; it requires a completely new, full-scope application process, which can take many months and significant expense. 

During this delay, agile competitors could capture valuable market share. Therefore, it is critical to base your licensing strategy on your 3- to 5-year business roadmap, not just your immediate needs.

FAQ – Legal tips about choosing your license

• My business only processes payments now, but we might offer wallets later. Which license should I get?
  While a PI license has a lower entry cost, upgrading to an EMI license later requires a completely new, lengthy, and expensive application process. It is often more strategic to apply for the EMI license from the start if e-money services are in your future business plan. For a strategic consultation on your business model, contact us at office@arws.cz.
• Can a PI hold client funds at all?
  A PI can only hold client funds in a payment account specifically for executing a defined payment transaction. They cannot be held indefinitely or for storage, which is the exclusive domain of an EMI. Need to clarify your model's compliance? Email our experts at office@arws.cz.

The Full EMI License: What You Need to Comply With

The application for a full EMI license is a rigorous process designed to ensure that only well-managed, financially sound, and operationally robust institutions are authorized to handle public funds. The Czech National Bank (CNB) examines every aspect of the applicant's business.

The Cornerstone: €350,000 Initial Capital

The most fundamental requirement is the possession of initial capital of at least €350,000. This capital must be fully paid up and held in a bank account at the time of application. Crucially, the applicant must provide the CNB with indisputable proof of the legal origin of these funds to comply with anti-money laundering regulations. This is not a fee paid to the regulator; it is a prudential safeguard that must be maintained by the institution to ensure its financial stability.

Management & Ownership: The 'Fit and Proper' Test

The CNB places immense importance on the quality and integrity of the people behind the institution. All members of the management board, key function holders, and shareholders with a qualifying holding (typically 10% or more) must undergo a "fit and proper" assessment. This involves a thorough vetting of their professional qualifications, relevant experience in the financial or technology sectors, and personal trustworthiness, which includes a clean criminal and regulatory record. 

Applicants must complete detailed questionnaires and provide extensive documentation, a process where legal guidance is invaluable. For assistance with preparing these critical documents, get tailored legal solutions by writing to office@arws.cz.

The Business Plan: Your Blueprint for CNB Approval

The business plan is the single most important document in the application package. A generic or poorly justified plan is the most common reason for rejection. The CNB expects a highly detailed, realistic, and comprehensive blueprint for the first three years of operation.

This document must include:

• A detailed description of the proposed e-money and payment services.
• A thorough market analysis, with a clear focus on the target customer base within the EU.
• A credible marketing and distribution strategy.
• Complete financial projections (balance sheet, profit and loss statement) based on sound economic calculations.
• A description of the company's organizational structure, governance, and internal control systems.
• A comprehensive outline of risk management principles and AML/CFT procedures.

Operational and Technical Readiness

Applicants must prove they are operationally ready to launch. This includes having sufficient material, technical, and organizational resources to provide the proposed services securely and reliably. A key requirement is the establishment of a physical office in the Czech Republic, as the CNB expects at least part of the business to be genuinely managed from within the country. You must also describe your IT systems, data security measures, and procedures for safeguarding client funds.

Key Risks in the EMI License Application Process

Legal risk and potential issues	How ARROWS helps
Inadequate Business Plan: The CNB rejects the plan as unrealistic, incomplete, or lacking focus on the EU market, causing significant delays or outright refusal.	Expert Business Plan Review & Drafting: We ensure your business plan and financial projections are robust and meet the CNB's stringent, often unwritten, expectations. Get expert help by writing to office@arws.cz.
Failure of 'Fit and Proper' Test: Directors or shareholders are deemed unsuitable due to insufficient experience or issues with background checks, leading to application rejection.	Pre-Vetting and Documentation Preparation: We conduct preliminary assessments and meticulously prepare the required personal documentation and trustworthiness forms to prevent surprises. Need assistance? Contact us at office@arws.cz.
Insufficient Proof of Funds: The origin of the €350,000 initial capital is not clearly and legally documented, raising AML red flags with the regulator.	Legal Opinions & Documentation: We provide legal opinions and assist in structuring the documentation to clearly demonstrate the legitimate source of your capital. For immediate assistance, write to us at office@arws.cz.
Flawed Internal Policies: The submitted AML/CFT, risk management, or data protection policies are generic or do not comply with Czech and EU law (e.g., GDPR), resulting in requests for major revisions.	Preparation of Internal Company Policies: We draft bespoke, compliant internal policies tailored to your specific business model, ensuring they pass regulatory scrutiny. Get tailored legal solutions by writing to office@arws.cz.

Your Step-by-Step Guide to the CNB Application Process

The journey to obtaining an EMI license is a structured, multi-stage process. Understanding the timeline and key milestones is essential for effective planning and a successful outcome. A common pitfall is rushing the preparation phase; a meticulously prepared application, even if submitted later, will almost always be approved faster than a hastily compiled one that triggers multiple rounds of regulatory queries.

Phase 1: Preparation (1-3 months)

This is the most critical phase, where the foundation for success is laid. It involves a series of legal and administrative tasks that must be completed before the application can be submitted.

Key steps include:

• Company Registration: Establishing a legal entity in the Czech Republic, typically a limited liability company (s.r.o.) or joint-stock company (a.s.).
• Bank Account Opening: Opening a corporate bank account with a Czech bank.
• Capital Deposit: Transferring and depositing the minimum initial capital of €350,000.
• Documentation Drafting: Preparing the entire application package. This includes the business plan, financial forecasts, personal questionnaires for management, descriptions of internal controls, AML policies, and all other required annexes.

ARROWS can manage this entire preparatory phase, from company incorporation to drafting all legally required documentation, ensuring every detail aligns with CNB expectations.

Phase 2: Application Submission and CNB Review (3-9 months)

Once the documentation is complete, the application is submitted electronically to the CNB via a secure data box or signed email. Upon submission, an administrative fee of CZK 50,000 (approximately €1,850) is due.

The CNB then begins its formal review. The statutory deadline for a decision is six months from the submission of a complete application. However, the CNB frequently requests additional information or clarification, which pauses the clock. For this reason, a realistic timeline for the review phase is between 3 and 9 months, particularly for applicants with non-EU founders or complex business models. Our lawyers are ready to assist you – email us at office@arws.cz.

Phase 3: Final Decision and Commencement of Operations

If the CNB is satisfied that all legal and prudential requirements have been met, it will issue the EMI license. The decision is made public, and the company is added to the official register of supervised entities. Before launching services, the CNB may conduct an on-site inspection of the company's Prague office to verify its operational and technical readiness. ARROWS provides full representation before public authorities, managing all communications with the CNB throughout the process to ensure clarity and efficiency.

The "Small EMI" (SEMI) License: A Smart Starting Point?

For startups and businesses with a more limited initial scope, the Czech Republic offers an alternative route: the Small-Scale Electronic Money Issuer (SEMI) license. This license is designed to lower the barrier to entry into the market but comes with significant limitations.

What is a SEMI License?

A SEMI license allows a company to issue electronic money and provide related payment services without needing to meet the substantial €350,000 minimum initial capital requirement. This makes it an attractive option for early-stage ventures that wish to test their business model without a large upfront capital investment. The application process is generally simpler and faster than for a full EMI license.

Understanding the Limitations

The flexibility of the SEMI license is balanced by two critical restrictions that applicants must understand:

1. Geographical Scope: A SEMI license is valid only for operations within the Czech Republic. It does not grant EU passporting rights, meaning you cannot offer your services to customers in other EU member states.
2. Turnover Limits: The business is subject to strict financial caps. The average outstanding electronic money in circulation cannot exceed €5 million. Furthermore, the monthly average of payment transactions not related to the issued e-money is limited to €3 million over a 12-month period.

Should a SEMI's business grow beyond these thresholds, it is legally required to apply for a full EMI license, a process that involves meeting all the standard requirements, including the €350,000 capital injection.

FAQ – Legal tips about the SEMI license

• Is a SEMI license a good way to test my product before expanding to the EU?
  It can be, but only if your initial business plan is exclusively focused on the Czech market. If your goal is pan-EU operation, applying for a full EMI license from the outset is more efficient than a two-step process. Need to discuss your strategy? Email us at office@arws.cz.
• What is the main advantage of a SEMI license?
  The primary advantage is the lower financial barrier to entry, as there is no €350,000 initial capital requirement. This makes it attractive for early-stage startups testing a new concept. For help with your application, contact us at office@arws.cz.
• How difficult is it to upgrade from a SEMI to a full EMI license?
  Upgrading involves a completely new application process for a full EMI license, including meeting the €350,000 capital requirement and undergoing the full CNB vetting procedure. It is not a simple "upgrade" but a new, comprehensive licensing procedure. Our lawyers are ready to assist you – email us at office@arws.cz.

Beyond the License: Your Ongoing Compliance Obligations

Obtaining an EMI license is the beginning, not the end, of your regulatory journey. As a licensed financial institution, your company will be subject to continuous supervision by the Czech National Bank (CNB) and must adhere to a strict set of ongoing compliance obligations. Failure to do so can result in severe penalties, including substantial fines and the revocation of your license.

Robust AML/CFT Framework

All EMIs are classified as "obliged entities" under Czech and EU Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) laws. This imposes a legal duty to establish and maintain a robust AML/CFT compliance program.

This program must include:

• Customer Due Diligence (CDD): Implementing "Know Your Customer" (KYC) procedures to verify the identity of all clients.
• Transaction Monitoring: Using systems to monitor transactions for unusual or suspicious patterns.
• Risk Assessment: Regularly assessing the company's exposure to money laundering and terrorist financing risks.
• Reporting: Reporting any suspicious transactions to the Czech Financial Analytical Office (FAU).

ARROWS provides essential services in this area, including the preparation of internal company policies and delivering professional training for employees to ensure your team understands and can execute these critical duties.

Safeguarding Client Funds

A core obligation for any EMI is the protection of customer funds. You must ensure that all funds received from clients in exchange for e-money are segregated from your company's own operational capital. These funds must be held in a separate, designated "safeguarding" account at a commercial bank or invested in highly liquid, low-risk assets. This rule ensures that client money is protected even in the event of your company's insolvency.

Regular Reporting and Audits

EMIs are under the constant supervision of the CNB. This requires submitting regular reports detailing your financial condition, payment transaction volumes, capital adequacy levels, and compliance with safeguarding requirements. Furthermore, depending on the company's size based on assets, turnover, and employee numbers, it will be subject to a mandatory statutory audit of its annual financial statements.

Post-Licensing Operational and Compliance Risks

Legal risk and potential issues	How ARROWS helps
AML/CFT Violations: Failure to implement proper KYC procedures or report suspicious transactions, leading to massive fines (up to CZK 130 million) and license revocation by the CNB/FAU.	AML Program Implementation & Training: We design and help implement your AML/CFT framework and provide certified training for your staff to ensure full compliance. For immediate assistance, write to us at office@arws.cz.
Improper Safeguarding of Funds: Mixing client funds with operational capital, a severe breach that can lead to immediate supervisory action, loss of client trust, and license suspension.	Drafting Legally Required Documentation: We draft the internal rules and segregation policies required to ensure your client fund safeguarding methods are compliant from day one. Need legal help? Contact us at office@arws.cz.
Capital Adequacy Failure: Ongoing capital falls below the regulatory requirements due to operational losses or poor financial management, triggering CNB intervention.	Ongoing Legal Consultation: We provide continuous legal advice on prudential requirements and can connect you with financial experts to ensure your capital adequacy calculations are always correct. Get tailored legal solutions by writing to office@arws.cz.
Cross-Border Compliance Gaps: Operating in another EU country via passporting without adhering to that specific country's local consumer protection or marketing rules, leading to sanctions from a host-country regulator.	International Legal Support: Through our ARROWS International network, we provide guidance on host-country regulations to ensure your cross-border operations remain compliant. Do not hesitate to contact our firm – office@arws.cz.

Expand Your Reach: How EU Passporting Works from Prague

The primary strategic advantage of a Czech EMI license is its function as a "single passport" to the entire European Economic Area (EEA) market. However, this access is not automatic; it requires a formal notification process managed by the home and host state regulators.

The "Single Passport" in Practice

Once your EMI is licensed by the CNB (the "home regulator"), you can activate your passporting rights to operate in other EEA countries ("host Member States"). The process begins when your EMI formally notifies the CNB of its intention to provide services in a specific host country. The CNB then reviews this notification and, if complete, forwards it to the regulatory authority in that host country. This communication between regulators officially establishes your right to operate there.

Freedom of Services vs. Right of Establishment

Passporting can be exercised in two distinct ways, offering flexibility for your international expansion strategy:

1. Freedom to Provide Services: This allows you to offer your services to customers in other EEA countries remotely from your base in the Czech Republic, without needing a physical presence there. This is the most common and cost-effective way to serve the entire EU market.
2. Right of Establishment: This gives you the right to set up a physical branch in another EEA country to serve the local market directly. This is a more resource-intensive option suitable for markets where a local presence is strategically important.

Leveraging ARROWS' International Network

While the passporting framework is harmonized, each host country may have specific local rules regarding consumer protection, marketing, or contract law that must be respected. Navigating these local nuances is crucial for avoiding compliance issues with host state regulators.

This is where ARROWS provides unique value. As an international law firm operating from Prague, European Union, we have spent over 10 years building our ARROWS International network. This network gives our clients seamless access to trusted legal experts in over 90 countries, ensuring that your cross-border expansion is not only legally sound in the Czech Republic but also fully compliant in every market you enter. Do not hesitate to contact our firm for cross-border legal support – office@arws.cz.

What's Your Next Step? How ARROWS Can Secure Your EMI License

The path to securing an EMI license in the Czech Republic is complex, demanding meticulous preparation, deep regulatory knowledge, and flawless execution. The process involves a detailed application, a highly scrutinized business plan, stringent vetting of personnel, and adherence to complex ongoing compliance rules. Attempting this without expert local legal counsel presents a significant risk of costly delays, wasted resources, and potential rejection.

A Comprehensive Suite of Services for Your Success

ARROWS offers a complete, end-to-end service designed to manage the entire licensing process for our foreign clients, ensuring an efficient and successful outcome. Our deep experience with the Czech National Bank allows us to anticipate challenges and prepare an application that meets the highest standards.

Our services include:

• Legal consultations to assess your business model and determine the most appropriate license (EMI, SEMI, or PI).
• Preparation of all required documentation, including expert review and drafting of the critical business plan, financial projections, and internal policies.
• Contract drafting and review for all your operational needs, from customer terms and conditions to vendor agreements.
• Full representation before public authorities, handling all communications with the CNB and other regulatory bodies on your behalf.
• Professional training for your employees on essential compliance topics, including certified AML training.
• Assistance with obtaining any other necessary licenses or regulatory approvals to support your business operations.

The path to launching your fintech services across the EU begins with a robust legal foundation in a strategic location. Let our team of experts at ARROWS, a leading Czech law firm based in Prague, be your guide. 

For a confidential consultation on your EMI license application, contact our international client desk today at office@arws.cz.

FAQ – Most common legal questions about the Czech EMI License

• How long does the EMI license application process really take in the Czech Republic?
  The statutory deadline for the Czech National Bank (CNB) to decide is six months, but the total time from starting preparations to receiving the license is typically 6 to 9 months. This can be longer for non-EU applicants or if the initial application is incomplete. A meticulously prepared application is the key to a faster process. To ensure your application is complete and correct, contact our legal team at office@arws.cz.

• Do the company's directors need to be Czech residents?
  While there is no strict legal requirement for directors to be Czech residents, the CNB requires that at least part of the business is genuinely operated from the Czech Republic. Having senior management with a presence in the country is highly advisable for demonstrating substance and ensuring effective supervision. For advice on structuring your management team, get in touch at office@arws.cz.

• Can I serve non-EU clients with a Czech EMI license?
  Yes, a Czech EMI license allows you to attract customers from all over the world. However, your primary business activities and focus, as outlined in your business plan, must be within the EU/EEA to satisfy the CNB. The license's main regulatory power is its "passport" within the EEA. Need to discuss your global business strategy? Write to us at office@arws.cz.

• What are the most common reasons for the CNB rejecting an EMI application?
  The most common reasons include an unconvincing or incomplete business plan, failure of key personnel to pass the 'fit and proper' test, unclear or undocumented sources of initial capital, and inadequate internal control or AML/CFT policies. Meticulous preparation is essential to avoid these pitfalls. Let our experts help you prepare a successful application by emailing office@arws.cz.

• What are the ongoing costs after obtaining the license?
  Beyond the initial application fee and capital requirement, ongoing costs include annual auditing fees, potential CNB supervisory fees (though many administrative fees have been abolished), salaries for compliance staff, costs for compliance software, and legal consulting fees for regulatory updates. These operational costs must be factored into your financial plan. For a detailed cost analysis, contact us at office@arws.cz.

• Does the Czech Republic have a "regulatory sandbox" for fintechs?
  The Czech Republic is actively developing a regulatory sandbox, with a project launched by the Ministry of Finance and the OECD to foster innovation. While the CNB has historically been cautious, this signals a growing commitment to supporting the fintech sector. To understand how your innovative model fits within the regulatory framework, our lawyers are ready to assist you – email us at office@arws.cz.

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