Deposit Insurance Treatment of E-Money: An Analysis of Policy Choices

The expansion of digital financial accounts among poor customers has raised the question of whether e-money should be covered by deposit insurance and if so, how. This Technical Note examines the options while arguing that deposit insurance should not be the first line of defense, for two primary reasons. In many emerging markets where authorities have limited resources, their first area of focus should be on strong prudential regulation and supervision to ensure safe and sound institutions. Second, electronic money issuers are engaged in a narrow set of activities and in most cases pose limited or no systemic risk, compared with financial institutions that intermediate deposits and issue credit.